The aim of this paper is to evaluate the impact in terms of poverty and
cost of the introduction of social (or non-contributory) pensions in
Europe. We use data from the household survey EU-SILC and focus on 17
countries. We simulate - in a static framework - the introduction of two
social pension schemes: universal and means tested social pensions. We
see that the old-age poverty would substantially decrease (average
poverty rate goes from 19.7 to 2.5 per cent with the universal scheme)
but not totally, even though the level of the universal pension is set
up to the poverty line. The impact on poverty with the means tested
social pension is quite similar (though always smaller) than the one
with the universal pension, since most elderly have few other income
sources than pensions. On the opposite, it costs less. In fact, the
means test reduces substantially the number of entitled elderly while
the universal pension leads to a 'leakage' to non-poor elderly.
Key words: Old age poverty, pension systems, social pensions.
JEL Codes: D310, D190, H55, I380