A mandated government annuities system will punish low-income earners, according to the Investment and Financial Services Association (IFSA).
According to IFSA, in its interim report, the Henry review examined the possibility of a compulsory government annuities scheme.
Research commissioned for IFSA, however, showed that such a scheme would favour wealthier people at the expense of lower income earners, IFSA chief executive John Brogden said.
"Such a scheme would be manifestly unfair and result in lower paid workers subsidising wealthier Australians," Brogden said.
"According to the Australian Bureau of Statistics, manual labourers do not live as long as office workers. A government-run annuities scheme, by its nature, rewards those who live longer at the expense of those who have a shorter life."
He said a government scheme would also discourage people from voluntarily adding to their retirement savings because of the "harsh restrictions imposed on how savings can be accessed in retirement".
A mandated scheme may also deny people the choice of wanting an annuity product.
Brodgen also said the scheme "forces people to fund a scheme that may not be on just terms and could be in breach of the Australian constitution".
Brogden said people should have the right to choose how to manage their retirement savings.
