Population aging causes financial imbalance of the pay-as-you-go social security (public pension) program. To remedy this problem but also ensure the adequacy of retirement saving for employees, many countries complement or substitute for public pensions by regulating private pensions.

This paper is the first to utilize national pension policy change as a natural experiment to identify the impact of private pensions on household voluntary savings. Specifically, I evaluate the household saving response to mandatory employer-provided pension reform in Taiwan, which mandates that all private sector employers contribute at least 6% of the wage to employees' individual pension accounts monthly since 2005. 

I use the workers in the unaffected sector as a comparison group and employ a difference-in-differences method to estimate the impact of the reform on household saving rate. My results suggest that making private pensions mandatory significantly reduces prime-age (20--50) household saving rate by 2.06% to 2.45% and imply the degree of substitutability between private pension and saving is about -0.51 to -0.61. Since private pensions only partially offset household saving, the mandatory private pension policy could effectively raise employees' retirement wealth.