The age pension currently costs $39 billion and superannuation tax concessions will cost the budget around $35 billion in 2013-14.

Deloitte says Australians need to start contributing up to an 7.5 per cent of salary to super in addition to existing arrangements. Photo: Nic Walker

Large numbers of workers approaching retirement will be forced into modest lifestyles devoid of creature comforts unless the superannuation system is given a comprehensive overhaul.

The grim finding was released on Wednesday by Deloitte, which found that Australians need to start contributing an extra 5.5 to 7.5 per cent of salary to super in addition to existing arrangements or risk coming up short.

Deloitte superannuation adviser Wayne Walker said it was important Australians not get too complacent about the compulsory retirement savings system, which now accounts for $1.8 trillion.

"Sometimes when you look at the lawn from a distance and it looks pretty good but when you get close up the problems are obvious," he said.

The "Adequacy and the Australian Superannuation system" paper forecasts that 75 per cent of retirees will still be eligible for all or some of the age pension in 20 years time.

Central to the improvements flagged by the paper was a recommendation that concessional contributions be amended from yearly limits to a lifetime cap.

For the year 2014/15 investors are limited to making tax advantaged contributions of $30,000 or $35,000 for the over 50s.

"We think there needs to be lifetime limits and they need to be realistic," said Mr Walker.

"Once you fall behind you stay behind. A figure of $40,000 or $50,000 would only offset those years where there was little in the way of contributions."

The findings draw heavily from standards developed by the Association of Superannuation Funds of Australia (ASFA) which has modelled how much singles and couples would need for either a modest or comfortable retirement.

The model for a modest lifestyle in retirement allows $17 a week for communications and $157 for food. This compares to the comfortable model which allocates $34 a week for communications and $195 for food.

Mr Walker said that it was important investors realised that this measure of "comfortable" did not represent the lap of luxury. "Even those who achieve a comfortable retirement will not be going to Bali every year," he said.

Further amendments the paper calls for include making a greater suite of investment products available, encouraging Australians to work longer, making financial advice more affordable and improving engagement of super fund members.

"Now is the time for the government to work really hard to provide access to lifetime and differed annuities" Mr Walker said. "You can have too much red tape for funds and advisers to deliver good advice for a realistic price."