Most Australians die with large superannuation balances in their accounts, having lived their retirement years with an unnecessary degree of frugality, research from the CSIRO has revealed.

Dr Andrew Reeson, a behavioural economist from CSIRO’s organisational and socio-economic sciences team, is analysing superannuation data to better understand how Australians spend in their final decades.

“There’s been popular concern about people spending too quickly and blowing it on around-the-world cruises, and falling back on the pension,” Reeson said.

“But now other research, and our own data, shows that is not happening in the vast majority of cases, and that most Australians actually spend during retirement very conservatively, withdrawing their super at or very close to the minimum requirement.”

Reeson said his concern was that people who had worked hard to save were not enjoying themselves as much as they could in retirement.

Some people wanted to ensure they had a decent sum of money to bequeath to their children, and others worried about using up their superannuation and relying on the pension alone if they lived too long.

But the data showed uncertainty about how long people would live could not entirely account for their conservative approach.

Estimates by superannuation advisory firm, Rice Warner, state $8.5bn was bequeathed by Australians who died before using their superannuation savings.

Prof Deborah Ralston, from Monash Business School’s department of banking and finance, said the CSIRO findings reflected those from her research.

“I think we really have done well on promoting the accumulation stage of superannuation and getting people to understand the importance of saving and supplementing their aged pension, but we haven’t yet come to grips about how we then use super in the post-retirement stage,” Ralston said.

“What we don’t really have is a range of annuity products where people can better prepare for those costs of ageing they might be concerned about. There’s real potential there for a market to create better products, where you can put money aside into annuities that might guarantee you, for example, a certain income over the age of 85.”

For those holding on to their money in the hope of leaving it to their children, Prof Roger Wilkins, from the Melbourne Institute of Applied Social and Economic Research, said it might be worth considering how useful that money would be to family members.

“Most people die when their children are approaching retirement age, so at a time where they may not neccesarily need it anyway,” he said.

“If you’re young and looking to buy a house or starting a family, that’s when it might be more useful.”

Frugality was not necessarily bad, but it became a problem when people were unnecessarily going without.

“We should be encouraging those in retirement to instead enjoy a good standard of living if that’s what they can afford,” Wilkins said.

In June, legislation passed through the Senate to tighten pension eligibility, but Wilkins said it could be tightened further to force wealthier people to draw on their super.

“What you get is wealthy people bequeathing wealth to their children, who become wealthy by virtue of their birth rather than their own economic activity, and that could be contributing further to inequality of wealth in the community,” he said.

The treasurer, Scott Morrison, seems to agree. In May he told Fairfax Media that superannuation was for maintaining living standards, not to fund inheritances.

“The purpose of providing tax incentives to encourage people to build up their super is so they can draw down on it in their retirement, not maintain it as a capital pool to be passed on as an inheritance,” he said.

Ralston said although the impact of this non-spending on the economy was limited for the moment – about 12% of the population are over 65 – the economic impact risked becoming more pronounced in future.

“It won’t be long until 20% of the population are over 65, and it is obviously good if those people are fully participating in the economy,” she said.

“The other thing people aren’t doing in retirement is accessing the equity in their homes, with 85% of people over 65 owning their home outright, so we need better products to help people draw on that equity too.”