[jeroenhd]

European pension funds do exactly the same, the money doesn't just disappear into a vault somewhere. This is good because the profits can help combat inflation over a lifetime of work. The height of the pensions is very much dependent on market factors.

I think a bigger advantage of this system is that the money isn't your responsibility. Many people lack the fiscal responsibility to manage stocks and bonds or will do the smart thing and save up for later when they receive their pay cheque. By shifting responsibility to the individual the most vulnerable of society are most at risk of financial mismanagement and poverty during retirement or even not being able to retire at all.