We analyze the political economy of pay-as-you-go (PAYG) pension systems in the presence of both financial and demographic shocks. A politician responds to shocks in a way that replicates major developments of pension systems around the world. A decrease in the return on capital increases contributions and benefits, while a decrease in the population growth rate increases contributions, but it lowers benefits. A lower mean or a higher variance of population growth causes the pension system to shrink. Contrary to the political arrangement, the Ramsey planner sets a higher average contribution when the demographic shock has a lower mean or a higher variance.