The impact of pensions on the income gap among the elderly: the case of Taiwan's National Pension

In most countries, first-pillar public pension systems provide comprehensive coverage for all citizens. By contrast, Taiwan's unique National Pension (NP) is a compulsory, defined-benefit pension insurance that covers citizens excluded from occupation-based social insurance. As such, the NP inevitably includes disadvantaged citizens in its coverage. Using NP administrative data to link labour insurance, social welfare allowance, and income tax, we find that the NP narrows the pension benefit gap between the disadvantaged and the non-disadvantaged. The narrowing effect is stronger for the younger than for the older generation. Furthermore, the NP enhances pension benefits for women more than for men, thereby narrowing the difference in pension benefits between the sexes. As expected, the NP is more important for low-income citizens than for their wealthy counterparts.