Isn't there another option? A government-run defined contribution scheme.

The Malaysian social security system runs on several pillars - one of which is the government-run defined contribution scheme, called the Employees Provident Fund ("EPF"). In this scheme, employees have deductions taken off their paycheck and the employer matches. The EPF invests the collected funds, paying dividends to its contributors, and the total amount accrues until the contributor reaches retirement age. At that point, the contributor withdraws the total amount and has this sum to last him/her for his retirement.

Government employees have a separate pension track, which is a defined benefit system exactly like you described. While fantastic in theory, this system has become unsustainable as increased life expectancy has made the defined benefits pension scheme run into deficits which needs to be topped up, yearly, by the taxpayer. It's manageable so far since it applies only to the civil service (5% of the population), but it's clear that such a system would not work for the population at large.

I think the EPF's system might be a reasonable policy compromise between what you suggest and the current system. I agree that too much choice means your average non-financially-inclined retiree is going to face "analysis paralysis" and end up with the worst possible outcome through inaction.

Nevertheless, the shortcomings of a defined contribution system on its own are clear even in Malaysia's case. A huge problem in Malaysia is people frequently retire with insufficient EPF funds. To manage retirement, the middle class frequently tops up their savings with private retirement schemes, to varying degrees of success. I suspect the "real" solution will involve some combination of policy options.

Thanks for the thought-provoking article which helped me exercise some of "policy wonk" muscles. Happens too infrequently on Medium!