According to global standards, three to five people should be employed against every retiree. In other words, the pension of a retired person is paid from the premium payments of three to five people.
Given the life expectancy, pension funds will be able to pay pension as per the first condition if those who retire after 30 years live for 20 years. Therefore, there are two prerequisites for pension funds: first, people work for 30 years and receive pension for nearly 20 years, and second, between three and five people should be working for each retired person. Of course, these numbers are not exact.
Hadi Haqshenas, an economist, prefaced his article for the Persian daily Arman-e Melli with this note. A translation of the text follows:
In Iran, the average number of working years is way lower than 30 because of the early retirement of some people, according to the law. Also, when work records are reduced with retirement, particularly in cases of early retirement, the receipts are based on the living environment and the funds have to pay pension for more than 20 years.
On the contrary, retirees, who usually get pension for less than the standard 20 years in the world, are paid for more than 20 years in Iran. The head of the Social Security Organization says that in Iran pensions are being paid for 20-24 years after retirement, but this number is about 14 years in the world, i.e., an almost 10-year difference. These numbers might be slightly different, but they are the same in general.
The main point is that given Iran’s double-digit inflation rates and the lack of social infrastructure and full coverage, retirees are not in a favorable situation and their purchasing power has always been on the decline, especially in the past decade, the so-called decade of sanctions. But we should not forget that the companies handed over by the government to the pension funds in return for its debts are valuable assets. Pension funds also have assets in various industries. The point is that these companies are not being managed efficiently like all state companies.
The same criticisms facing state-owned companies are leveled at companies affiliated to pension funds. Worldwide, the resources of funds are usually channeled into the stock market for buying shares, but in Iran, the stock market is struggling with fluctuations. The management of companies is not stable either, due to the country’s political disputes internationally.
These companies are not productive enough, as a result of the lack of raw materials or the high prices of raw materials.
In short, pension funds in Iran are grappling with a combination of all problems their counterparts may face in the world, including the mismatch between working and retired people, as well as lack of efficiency and high inflation that have adversely hit the purchasing power of retired people.
In addition, sanctions have deprived these companies of export revenues and obstructed the import of raw materials. Finally, if these companies invest in the capital market, they will face other challenges. As a result, the expenses of these funds outweigh their resources. Nevertheless, one cannot claim that the country has to sell a part of land to pay the retirees [this is in reference to an official who said, “We’ll have to sell Kish, Qeshm and Khuzestan to pay retirees’ pension”.]
If the approaches governing the management of pension funds change, the government pays its debts to these funds and the companies handed over to pension funds in the past become efficient, it seems that a significant part of the problems will be solved.
There are nearly 20 pension funds in Iran, which were supposed to be integrated into the Ministry of Cooperatives, Labor and Social Welfare. That did not come to pass. Perhaps combining these funds into one or two funds can help economize the overhead costs.
