How about lowering taxes and let people be adults and plan for their own retirement? With those 40 years of taxes invested in an index mutual fund, I’d be a millionaire many times over rather than hoping for a paltry check each month.

Any retirement plan dependent on government means that you will get less value out than you put in. Think about “management fees” on an index fund – a fraction of a percent generally. Think about the de facto management fee taken by government – orders of magnitude more. Not to mention your return on “investment” is rather low and you can’t pass on a government pension to your children. So if you die at 50, the government keeps all that excess you “paid in.” That isn’t fair. People ought to have the freedom to opt-out.

A compromise might be to require paying in to a system, but you get to direct where that money is invested. Somewhat like a mandatory IRA. In the US, you are forced to pay into social security – why not “force” people to have an IRA instead? However I think the real reason that doesn’t work is that it would make people less dependent on particular political parties – because the government no longer has as much power over your survival. “Vote for us or else <the other party> will cut your benefits and make you starve.

Unfortunately, with all the talk of freedom, it’s mostly just talk. Actual freedom means being able to make your own decisions as well as living with the good or bad consequences of those decisions.

Sure, if you're starting on that basis. But it's a different thing entirely if you start out with an explicit deal saying "you pay 30% of your income to the government, and you get a pension when you retire" and then after you fulfill your part of the bargain, the government says "oh uh, that money you paid, we spent it."

We now have mandatory superannuation contributions which work pretty much how you're suggesting, and the government is pushing towards getting rid of pensions in future.

There's multiple issues there:

1) there's spartan explicit connection between the taxes paid then and the pensions paid now: most governments did not put that money in an explicit infrastructure or investment fund, the revenue from which explicitly pays for pensions. Additionally, we generally do not (in Australia) connect how much you paid in with how much your taking out, so we have no way to even ethically or materially judge whether someone really is our isn't "taking out more than they put in"

2) in the real economy, pensions are not paid for by your past taxes, but from future income derived from the level of capital investment and infrastructure and the labor force at the time of your retirement. The Australian pension system contracts a population of post boomer children to pay a debt they were never party to agreeing to pay: and chicken the general demographic numbers, aren't liable to be able to pay it given the relative size of the two populations.

3) from a normative point if view, the Australian system is quite generous (not as generous as some of the European ones). It is, dare I say it, unsustainable. Not only do you have to adjust for the pensioner discounts and additional payments offered to get it's true value, but it is much greater in volume compared to all other dole payments. With no means testing for your primary property, it's both a subsidy to the rich, encourages over investment in property, and has basically set us up to escalate inter generational war fare.

My advice to everyone is to assume it won't be there for anyone not already collecting it.

Don't get me wrong, I have some sympathy for the boomers who thought it would be available. But, they got to effectively overconsume by not putting sufficient away to invest for it, and in a competition between economic reality vs "what I'm supposed to get on my defined benefit pension", reality will win every time. Government isn't god.

Your first two points relate to what the government actually did with those payments, and not with the social contract between taxpayer and government.

I'm not sure I follow your third point. The pension system is far from generous - it's ~72% of after-tax minimum wage. Pensioners generally live in the same house they've lived in for decades, if they haven't downsized, and it's only the primary property that's not means tested so it's not like they're hoarding investment properties.

And they didn't get to 'overconsume by not putting sufficient away' - they did put that amount away, as part of their tax payments. What the government did with the enforced payments is a different matter.

Late response: I assume you've done the calculations right regarding the minimum wage, and that you've taken into account the additional payments not included under the label of pension.

To get an accurate view of the value of the pension though, you have to take the dollar face value and apply both pensioner discounts (practically everywhere in Aus, you will get discounts on your rates and utilities at the very least, in practice substantially more such as transport and consumables). In addition most also get to consume their imputed rent.

Don't get me wrong, I'm not saying all pensioners are "living it large". It is miserable to be a pensioner that doesn't own their home. But their true consumption possibilities are several multiples in practice of all our other social security payments, say for the unemployed or people on minimum wage for example, who don't own their own homes.

Given the demographic boom of the boomers, we are effectively paying living wages to the group that statistically hold the most wealth of any age group, and that we don't means test against the primary store of that wealth, I predict this system cannot last.

The government can enter into a defined pension scheme that proclaims it will be summer forever, and people can complain that they were promised that it would be summer forever, but a wise man knows that winter is coming...