The average age of retirement in Iran is 51.5 years which needs to be set right in the upcoming sixth economic development plan(2016-2021), as the global average retirement age is 60 years for women and 68 years for men, said Mahmoud Eslamian, head of the Civil Servants Pension Organization (CSPO).
“We have developed a plan to address the issue. If approved by the Majlis (Parliament), six months will be added to the retirement age with the passage of each (working) year,” the official said without providing exact details on the crucial issue.
He did, however, warn that if the plan is rejected in the chamber the CSPO “will face serious challenges.” The official stated in unambiguous terms that the behemoth pension organization will not be able to meet all its financial commitments unless there is a sizeable increase in the retirement age of government and state employees.
At present, the average salary in the last two years of an employee’s career determines the pension slab. “We are planning to raise this to five years from two in the upcoming development plan,” the Persian language newspaper ‘Iran’ quoted him as saying.
The CSPO is an independent legal body under the auspices of the Ministry of Labor and Welfare, and runs as an insurance company. The organization is responsible for the affairs related to the retirement of government employees in Iran.
Its beneficiaries include: civil servants and faculty members of universities and institutions of higher learning employed as tenure (permanent) teaching staff; judges, and the Ministry of Justice, diplomats; tenure employees of municipalities excluding mayors; and contract employees of the executive branch covered by the Civil Servants Pension Fund.
The military, law enforcement agencies, and the Islamic Revolutionary Guard Corps, have separate pension systems.
Eligibility criteria for retirement are: employees having served for 35 years regardless of their age and those with 30 years of service and have reached 50 years of age. Both categories are entitled to a full pension equivalent to one-month salary.
However, there are provision for early retirement that has direct effect on the pension. If, for instance, a teacher decides to quit after putting in 25 years of service he/she will be entitled to 25 days of basic salary every month instead of 30 days.
Low Pension
Eslamian pointed to the large number of pensioners living on low income and said currently, 1.2 million of the total pensioners receive a meager monthly amount equivalent to $560. “So they need to watch every penny they spend.”
However, he noted the four percent improvement in the purchasing power of pensioners covered by the CSPO during the last two years.
“The annual increase in pensions should keep pace with the inflation rate. Fortunately the Rouhani government’s approach to curb inflation has led to some increase in pensioners’ purchasing power.”
But it is still low. The main part of the problem occurred during the years 2005-2013, when pensions increased at a significantly lower pace compared to the soaring inflation.
During the same period, the purchasing power of pensioners declined by a whopping 67%.
“While the CSPO lacks funds to pay decent pensions to the deserving strata, it is unfortunate that huge financial frauds occur in companies where it had invested during the previous government’s tenure, he said.
Pension funds typically have large amounts of money to invest and are the major investors in listed and private companies.
The Civil Pension Fund Investment Company is the investment arm of the CSPO. As of 2012, the fund’s investments was as follows: chemical and petrochemical sectors: 31%; oil and gas companies 17% (example Iranol and Pasargad); transportation and communications 11% (i.e. the Islamic Republic of Iran Shipping Lines (IRISL), Aseman Airlines); and tourism (Iran Touring & Tourism Company.)
Financial Fraud
“In the past few years, a $120 million scam occurred in one of the petrochemical companies in which the organization had made investments. This is just one of the many” cases of corruption,” Eslamian said.
The offender is living in Los Angeles and the CSPO is seeking his extradition through Interpol. So far, after extensive investigations, the Judicial authorities have succeeded in recovering a quarter of the amount from his partners.
The financial fraud occurred under the guise of a contract to transport petrochemical products. According to the contract, 25% commission was given to the person for every $100 worth of petrochemical products transported, while now under a recently signed contract, the amount is actually only $3 for every $1000 worth of transported products.
Clarifying that the former director general of the CSPO was not involved in the violations, he said some of its employees and several former government officials have been convicted on corruption charges.
He also pointed to other financial fraud during the previous government’s tenure, citing the instance of a 20,000 sq. m plot of land valued $41.5 million that was sold for $8.8 million.
The government is also supporting the CPSO financially. In the future it will shift focus toward a (privately) funded system. The pension system will have three major pillars such as: social support and complementary and supplementary retirement insurance.
Eslamian criticized the government policy of several years according to which people are hired under the social security insurance -- the retirement/medical insurance scheme for private sector workers and the self-employed -- and said the process has harmed CSPO revenues.
“As per international standards, there should be at least 6 people employed for each retired individual, but in Iran the ratio is one person for each retiree.”
