It is doubtful that your second point really stands against what I wrote. After all, retirement funds add at least one layer of indirection between the person w

It is doubtful that your second point really stands against what I wrote. After all, retirement funds add at least one layer of indirection between the person who ultimately owns something (in this case, the person saving for retirement) and the economic decisions being made. That is, retirement funds dilute responsibility. If you wanted to analyse this whole issue seriously, you'd have to consider two separate effects: (a) private retirement funds as the normative default creates a glut of capital and (b) private retirement funds allocate their money with rather little personal involvement and responsibility. [1] As to the first point, things are more clear-cut. Yes, in a direct distribution system your pension depends on the future state of the economy. But so does your pension if you have retirement savings! After all, where does the growth of X% that you speak of come from? Ultimately, no matter what the system, your pension has to come from somewhere. The fact that this somewhere is obscured by a retirement funds system is not a point in its favour - quite the opposite, actually. Transparent systems are always preferable. [1] Yes, fund managers often are paid somewhat in relation to the success of the fund. Two problems with this: This incentive tends to focus on the short term, which is opposed to the interests of the future pensioners, and fund managers have more of an incentive to increase their volume rather than increase the quality with which they manage that volume (just like real estate brokers, with a nod to Freakonomics).