The panacea of private pensions funds is abandoning its positions in some eastern European and Latin American countries. Does state social insurance have the future?
In Latin America, the system of private pension funds has been a resounding failure. Centrally, due to privatization of funds led to the financialization of service providers, leading to profound instability and disability pension before risky financial "bets".
I recommend the work to the Argentine case of Nicolás Dvoskin:
http://www.aahe.fahce.unlp.edu.ar/jornadas-de-historia-economica/iii-cladhe-xxiii-jhe/ponencias/Dvoskin.pdf
https://isaconf.confex.com/isaconf/forum2012/webprogram/Paper22430.html
This paper might give you and idea of fiscal costs and the transition to the FDC system introduced in Chile in 1981:
http://escueladegobierno.uai.cl/wp-content/uploads/2014/05/WP_005.pdf
There will be incentive issues which could negatively impact the labour market if everyone is guaranteed a very high state pension. But then people might work harder for a system that has their back (like, feel quite OK about paying taxes, as compared to paying taxes to N Korean government).
This is a famous case of the nanny state. But really, people are often short sighted and if they cannot access good opportunities in the markets, or cannot negotiate collectively to get what their labour is worth, then many people will work hard all their lives and have little nor nothing to show for it at retirement.
My opinion is that the state should guarantee a socially determined minimum living condition for the elderly (if it can possibly afford it), and then force people to save more up to a certain point through a progressive savings plan (in Canada there is the CPP, for example, and you pay a percentage of income up to about double the average income, and also receive some amount up to about double the average income), and then leave people perfectly free to do what they will with remaining savings, with the exception that other income is taxable according to existing tax legislation.
I think the big question here is, at the aggregate level, is it pay as you go or contributory at the generational level. This is because of demographic change. Most existing systems are pay as you go, but birth rates are lower than they used to be. I think pay as you go is better, even if possibly unfair for some generation or another, because it is easier to administrate and would not punish a specific generation or cohort who did not access many opportunities. Consider today's generation of graduates, a very high share of whom will never access particularly high paying jobs because there was nothing for them when they exited the gates, and a few years later businesses preferred to hire new graduates than stale graduates. Pay as you go would not (especially) screw this cohort in retirement, whereas contributory only would.
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