Information about superannuation funds is often poor or incomplete, making it difficult for even financially literate Australians to choose between funds, according to the Productivity Commission.
The commission has released its draft report on the competitiveness and efficiency of the superannuation system, inviting submissions from industry participants.
The draft report, produced at the behest of federal Treasurer Scott Morrison, is intended to develop criteria to assess the system's efficiency and to develop alternative models.
When it comes to member decision-making, the report notes that planning for retirement involves a number of decisions that can be subject to "considerable complexity and uncertainty".
"Even individuals that are rational, financially literate and willing to invest time and effort in retirement planning can find decision-making to be very difficult," said the report.
Information about superannuation fund options is sometimes "incomplete or confusing", making it difficult for Australians to compare funds.
"Research has found that a significant minority of Australians have low financial literacy, with levels lower on average for females, the young and people with lower incomes," the report stated.
"People are subject to behavioural biases, including a reluctance to make active decisions when the benefits are distant, sensitivity to how choices are framed, and a strong aversion to realising short-term losses."
The report also cited surveys that have found many Australians put off planning for retirement until they are close to retirement age.
"There are some key gaps in the evidence on member decisions, especially in terms of individuals’ behaviour over the life cycle and how they respond to external events," said the report.
The deadline for forwarding written submissions to the Productivity Commission on the report is Friday 9 September 2016.