Noncontributory pensions for less developed countries: Rehabilitating an old idea

Less developed countries are facing choices in policies for retirement income support that bear similarities to the choices made in more developed countries 50 to 100 years ago. About 100 years ago, Australia and New Zealand developed a noncontributory pension system which continues to the present day. This system delivers basic, economic well-being at relatively low cost. Within less developed countries, values and goals for retirement income support vary widely. These are explored in the history of the development of the Australian and New Zealand systems. This paper also examines the impact of these unique systems on several indicators of well-being. Poverty is well controlled in this system but adequate income replacement is dependent upon private, individual saving. Because of efficiency and effectiveness, this unique noncontributory system is argued to provide an important, if old, idea for less developed countries.