APPENDIX II.1: Typical Problems with Public and Private Pension Schemes
Besides the projected increase in the fiscal burden, there are also other problems inherent in a pay-as-you-go public pension scheme, such as the New Zealand superannuation (in which current expenditure on pensions is financed by taxes on current income). However, it is clear that the main alternative to the pay-as-you-go system, namely introducing a system based on defined-contribution private pension schemes, also faces serious problems and challenges. This Appendix summarizes the typical problems with both systems.
APPENDIX II.2: The Existing New Zealand Superannuation System
The current superannuation system consists of a public pension scheme—New Zealand superannuation (NZS)—and private voluntary schemes.
APPENDIX II.3: International Experience with Privatizing Pension Schemes
This Appendix summarizes the experience of three countries that opted for a defined-contribution private scheme. The first, Singapore, introduced such a scheme in 1955, and never had a pay-as-you-go system. The second, Chile, had a very negative experience with its pay-as-you-go public scheme, and switched to a defined-contribution private scheme in 1981. The third, Australia, recently moved from an unfunded public scheme to a partly government funded-partly private funded retirement scheme.