Remodeling Public Funding of Pensions in response to Demographic Change

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The process of demographic transition starts with a decline in mortality and decline in fertility which lead to first increased and then decreased population growth. The last phase of the demographic transition is characterized by the slow population growth and hence falling population. This last phase is again featured by the aging of the population. The decreased birth rate and decline of mortality cause falling population and increased life expectancy. The speed and depth of the demographic transition are influenced by factors like migration, health, political and cultural issues.Aging has become an important issue in most of the developed and developing countries challenging the whole social security system. The larger proportion of the world population is becoming more and more elderly. It has been estimated that 26% of the OECD population will be over 60 years of age while at present the proportion is only 19%. By losing earned income and deteriorating health, aging causes economic insecurity to the people. Family support continues to be the most important financial support in most of the Asian Countries. But in other parts of the world majority of elderly find difficulty to avail family support and hence they are compelled to depend on the assistance provided by the state, pensions and also charity.A social security system is the main way through which a society can construct a protection net for its elderly people to help them for making the future plans and protect them from and to protect them from dearth. The future demographic developments would present significant challenges for social security systems. Besides, the recent financial crisis has shown that social security networks may be affected seriously during economic turmoil. Hence under the changing demographic conditions of a volatile country, optimization of pension financing continues to be an important issue.