Getting old presents a significant, additional risk of becoming or remaining poor. In later life, people reduce their working hours or stop working because of retirement options or health issues, and when they need or prefer to continue working, many earn lower wages. In many countries, the absence of social protection systems with high coverage and adequate benefits, their assets and savings, when savings exist, are usually not sufficient to guarantee adequate income security until the end of their lives. This makes older persons particularly vulnerable to economic insecurity as well as poverty, with limited options for escape.

In general, social pensions are paid to the elderly, but in developing countries social pensions address household, not individual, poverty while in developed countries social pensions are expected to raise beneficiaries above the poverty line, but in developing countries they provide fixed-level income supplements that are often insufficient to lift beneficiaries and their households out of poverty (Barrientos, 2009). However or whatever is the implementation of social pension, it is important to note that social pensions are non-labor income for the retirees or elderly with the purpose of preventing or reducing elderly poverty. Nevertheless, a common concern on the implementation of a universal pension is that the scheme is too costly. This paper attempts to estimate the financial cost of social pension scheme and quantify its potential role in reducing elderly poverty in Malaysia.