Most countries social-insurance pension schemes are PAYG financed. In such
institutional settings, politics play a tremendous role in guaranteeing the
balance between pension revenues and expenditures. However, the anticipate
d revenues appear inadequate measured against the prospective benefits many
pension schemes are expected to face - payment conditions may be indeed ma
nipulated as a result. This generates a political risk for public, PAYG-def
ined benefits programs in particular. Systemic pension reforms attempting a
switch from PAYG to capital funding and privatization face political risks
as well; the same is true for the reformed pension schemes. Due to the gen
eral role of the state in most economies, such a political risk seems unavo
idable, but may be mitigated.