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This paper studies the long-term consequences of polices designed to curb the rapid growth in pension deficits in Turkey where the mismanagement of pension funds has begun to generate considerable losses, despite a relatively young population that is just beginning to face population aging. With the contribution of pension losses to the already large public deficits reaching significant proportions in the 1990s, the pension issue has become a top priority in the policy reform and restructuring debate in the country. To address this issue, alternative policies to stop the deterioration in the fiscal balances of pension system are considered, and their economywide effects along the future path of demographic transition are investigated within an overlapping generations, general equilibrium framework.