Abasyn Journal of Social Sciences. Vol.10 No.2

The Effects of Population Ageing on the Public Pension System in Pakistan

Muhammad Wahab, Owais Mufti, Muhammad Aamir Khan

1 Content Writer: Institute of Management Sciences, PhD Scholar, COMSATS Institute of Information Technology, Islamabad
2 Assistant Professor, Institute of Management Sciences, Peshawar
3 Assistant Professor, COMSATS Institute of Information Technology, Islamabad


Academic and political debates across the globe have greatly voiced the challenge of undefined costs resulting from the defined-benefit pension system. The most important cause, which  resulted in the cash crunch of defined-benefit pension payments, stemmed from the rise in the old-age dependency ratio and increase in the average life expectancy. According to United  Nations population projections (2015), in Pakistan, the old-age dependency ratio [i.e., 61+/20-60] is expected to lift from 12.6 percent to 21.7 percent of the total population by 2050. The life  expectancy, which is expected years of life at birth given current death rates, has also been lifted from 54 in 1970 to 66 in 2015. These changes in population structures will have far-reaching  economic and social implications and is very alarming. Although, in Pakistan, population ageing is still at its nascent stage, but will result in many challenges ahead. The results of current study also confirm that there is long-run as well as short-run association of both government pension expenditures and general provident funds with increase in average life expectancy, old- age dependency ratio and total population of the country. Therefore, the intended incremental contributions of the study for policy makers are very much clear based on the results presented.
Keywords: Government pension expenditures, general provident fund, average life expectancy, old-age dependency ratio, pay-as-you go pension system




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