A new report has found that if smaller, high-cost superannuation funds merged with larger funds, then the average super balance of workers could be boosted by up to $22,000 in retirement.

In the last of three technical reports into the superannuation industry before the release of a final report next month, the Productivity Commission found the super industry could make cost savings of up to $340 million each year. And if the 50 highest-cost funds merged with the 10 lowest cost funds, the savings would explode to $1.8 billion a year.

The report found that if these cost savings gains was passed on to Australia’s 14.8 million super account holders as lower fees, they “would be $22,000 better off in retirement”.

The commission said the evidence suggested that economies of scale were still to be realised in the super industry.

In research described as some of the “most complex modelling the commission has done”, it found there were too many poor-performing funds that had not merged with larger funds because of a lack of real competition.

The financial regulator, Australian Prudential Regulation Authority, was also described as “weak” in its encouragement of mergers.