Coverage, performance and cost of universal pension: A comparative analysis Abdelhak Senadjki Universiti Tunku Abdul Rahman, Perak, Malaysia Email address: abdelhak@utar.edu.my Telephone: +605 468 4589 Fax numbers: +605 466 7407 Saidatulakmal Mohd School of Social Sciences, Universiti Sains Malaysia, 11800, Penang, Malaysia Email address: eieydda@usm.my Telephone: +604 653 4622 Fax numbers: +604 657 0918 Norma Mansor Social Security Research Centre, Universiti Malaya, Malaysia Email address: norma@um.edu.my Telephone: +603 7967 3648 Fax numbers: +603 7967 7252 Abstract Introduction The notion that the world is experiencing a demographic change with greater percentage of elderly population has led to reform in pension schemes to enhance elderly’s wellbeing. The most common defined benefit pension system (Japan, England, Germany and Canada, and China) largely based on the pay-as-you-go (PAYGO) concept has proven to be unsustainable given the increase in the number of pension recipients mainly due to increased longevity (Williamson, Price & Shen 2012; Duxbury et al. 2013). The defined contribution scheme (Hungary, Denmark, Thailand, Australia, Switzerland and Spain, Singapore and Malaysia), particularly that adopts a provident fund scheme, relies much on the contributions of employees (and employer) have been criticized for not being able to provide adequate financial income at old age (Asher, 1996). As consequence, the economic and financial wellbeing of the elderly is compromised. The defined benefit and defined contribution schemes are well defined by the World Bank to fall under the first and second pillar of retirements. These pillars are considered mandatory and compulsory to address basic retirement needs such as low earnings, uncertainty, risks and consumption smoothing. Many countries including developing countries (Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Slovenia, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States) have had some forms of the programs available to pensioners. Nevertheless, the coverage of these programs is rather limited (Gillian et al. 2000; Holzman et al. 2001) that lead to the existing of social exclusion mainly a result of income differentials. The third and fourth pillars of retirement are voluntary in nature with various activities to increase retirement savings and prolong current consumption patterns. Pillar zero, a non-contributory social pension is meant to specific targeted groups with a general aim of providing basic minimum income at old age as a