The majority of Australian retirees are now converting their superannuation into pension streams rather than taking a lump sum, and new data suggests this trend will accelerate.

Actuarial firm Rice Warner and financial services company Colonial First State recently released data showing that 83 per cent of the value of all superannuation retirement benefits in 2013-14 was invested in superannuation pensions. Only 10 per cent of retirement assets were taken as a full lump sum, while the remainder was taken as a partial lump sum.

Rice Warner said any suggestions that retirees preferred to take lumps sums over pensions did not correlate with reality.

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“The myth is that Australians have a strong preference for taking their superannuation upon retirement as a lump sum rather than a pension. An underlying message accompanying this myth is that many of these retirees will then rapidly spend their super money and fall back on a full age pension,” the report said.

Rice Warner predicted that 96 per cent of all retirement benefits will be taken as a pension by 2025 as the superannuation system matures.

The firm said this was because the combination of concessional tax treatment, growing average balances and improving pension products would encourage almost all retirees to keep their money in super.

“It is hardly surprisingly that the bigger the super balance, the more likely a retiree is to favour a pension.

“Again in 2013-14, almost 87 per cent of superannuation accounts (excluding self-managed super funds) with balances of more than $300,000 at retirement were taken as pensions – against 28 per cent of accounts with balances of $50,000 or less.”

Separate data from the Australian Prudential Regulation Authority above shows that a total of $57.9 billion in superannuation funds were converted into pensions in the year to June 30 2015, covering superannuation entities with more than four members and self-managed funds. That compared with $35.2 billion taken as lump sums.

VisionSuper chief executive Stephen Rowe said the trend towards taking pension streams was definitely increasing.

Retirees are drip feeding their super. Photo: Getty

“Behaviour is changing. More people are taking income streams when they retire,” he said. “At least 50 per cent of the money in our fund is being retained in the system.

“We are providing advice and the more advice members get the much better off they are to make informed decisions.”

However, Mr Rowe said in some cases it made sense to take out cash from super to buy an asset in retirement.

“We have spent a lot of time educating people about the benefits of transition to retirement too, where they can draw down funds once they become eligible and also keep working and recontributing into their super.

“It’s disappointing the government is trying to knock that off.”

Rice Warner noted that previously APRA did not give a break-up for lump sums related to retirement and those paid for such reasons as the death and incapacity of members.

“Yet, several commentators simply took the total of all lump sum withdrawals to be retirement benefits. In 2014-15 only $18 billion, or 58 per cent of the $31 billion paid as superannuation lump sums were related to retirement.”