Its modelling shows a 30-year-old worker in such a government-run fund would pay exorbitant fees, earn lower investment returns and end up $126,000 worse off at retirement compared with being in a top-performing industry fund.

"Workers' savings would become a slush fund for pork-barrelling by politicians chasing votes rather than investment returns," Industry Super Australia chief executive Bernie Dean says.

Liberal senator Andrew Bragg has previously called for an overhaul of the superannuation system, saying after three decades it has done little to get Australians off the aged pension and reduce pressure from the federal budget.

He called for a national default fund managed by the Future Fund.

Former Liberal treasurer and now chair of the Future Fund Peter Costello sees some merit in such a fund.

But he has also made it clear the Future Fund could only manage the investments in such an entity and that it could not take private money into a sovereign wealth fund.

Industry Super points to Productivity Commission research that a government-run super fund would be prone to political interference and riddled with conflicts of interest.

The commission also found internationally government-run super funds invest conservatively as few governments can withstand the political risk of negative returns during market downturns, leading to less money at retirement and more pressure on the aged pension to pick up the slack.

The Industry Super report also warned of an "impenetrable tangle of conflicted interests" in the default fund idea.

Australian Associated Press