How will Iran take care of its aging population?
Iran has five years to address the underfunding of its pension system or face an economic and budgetary crisis.
TEHRAN, Iran — Mohammad Bagher Nobakht, head of the Management and Planning Organization (MPO), warned March 6 that Iran has five years to address the underfunding of its pension system or face a major crisis. It is not the first time this alarm has been sounded.
Concerns about the looming pension crisis first surfaced in the early 2000s. At the request of the MPO, the World Bank prepared an in-depth report in 2003 that recommended “necessary steps” for implementing a reformed pension program. The matter remained unaddressed for more than a decade, however, largely due to macroeconomic mismanagement and the imposition of intensified nuclear-related sanctions between 2010 and 2015.
Of the 22 pension funds currently operating in Iran, only a few have a reasonable potential support ratio — that is, the number of people aged 15-64 per person aged 65 or above. According to Iran's leading economic daily, Donya-e Eqtesad, the support ratio for the Social Security Organization (SSO), the country's largest pension fund, hovers around 6.1. The ratio for the Farmers, Villagers and Nomads Social Insurance Fund is 29.1, and for the Attorneys Protection Fund it stands at 38.5. The rest of the funds are either insolvent or on the verge of bankruptcy, including the Civil Servants Retirement Organization (CSRO), the country’s second largest fund.
Mahmoud Eslamian, head of the CSRO, says his organization does a “breathtaking job” every month to pay pensions to 1.26 million retired civil servants. Given that there are only 1.15 million working contributors to the fund, its support ratio is currently lower than 1. As a result, up to 76% of the financing required for pension payments come from government sources, Eslamian remarked recently in an interview with the business magazine Tejarat-e Farda.
