Due to considerable financial sustainability concerns, Turkey has reformed her social
security system. The last leg of this reform process took place in 2008 and included
changes in replacement and contribution rates. This paper aims to analyse the impact
of the parameter changes on financial sustainability of the system and the consumer
well-being. Focus of the analysis is on the changes in the replacement rates and
the contribution rates. The paper contributes by providing a complex quantitative
analysis of the parameter changes through an OLG (overlapping generations) model.
It is found that the simultaneous reduction of replacement and contribution rates is a
reform design flaw and actually worsens the deficits of the system. One other finding
is that the closer a person is to retirement at the time of the reform, the worse the
impact of the reform is on the person.