The Economic Abyss or a Fund for Retirees
In the last days of November, the Islamic Consultative Assembly voted in favor of raising the retirement age, a decision aimed at delaying the crisis of pension funds, which awaits the final opinion of the Guardian Council. The numerous opponents in media and social networks have even described it as un-Islamic and forbidden.
Although it is likely that this bill will ultimately not pass the Guardian Council’s filter, the volume of criticism towards the parliament’s decision to raise the retirement age in Iran has reached a point where Sadegh Amoli Larijani, the head of the Expediency Discernment Council, has reacted, describing the parliament’s decision as unprofessional.
The retirement age is one of the most challenging decisions for governments in most countries around the world, often opposed by labor groups. According to the parliament’s bill, the retirement age for women and men will generally increase to 57 and 62 years, respectively. However, this bill introduces a new method of calculation, where the retirement history varies with different age coefficients, and based on the amount of history the insured has had so far, different coefficient rows are added to the required history for their retirement.
For example, if you are 20 years old and start working today, you must work for 42 and a half years to retire, or someone who has been working for six years must work another 34 years and pay insurance premiums to retire unless they reach 62 years of age before this time limit. The retirement age cap varies in different countries, from 67 years in Australia, Denmark, and Norway to 65 years in the US and UAE, 64 years in Japan, 60 years in Turkey, and 59 years in Saudi Arabia.
The standards for retirement age also differ across countries, generally being a function of life expectancy, climatic conditions, and work environment. However, the reason behind the controversial parliament bill to add 12 years to the retirement age is neither an increase in life expectancy nor an improvement in climatic conditions or even work standards. Instead, it is the government’s inability to fill the empty coffers of pension funds, which in some years have consumed the equivalent of Iran’s entire annual oil revenue and have been a focal point for many economic experts and media, especially in recent months.
Morteza Kazemi, an economic analyst, stated in a television interview with the media outlet ‘Farda Economy’ that one of the issues with pension funds is the budget deficit, but that’s not the main issue. Between 15 to 20 percent of the government’s general budget, approximately 350 trillion tomans, is allocated to two pension funds. In fact, this amount constitutes between 30 to 50 percent of the government’s budget deficit.
The Shadow of Fear Over Future Generations
If, as some experts say, empty pension funds are remembered as the scariest phenomenon of the new century in Iran’s economy, it wouldn’t be incorrect. Although economic experts have been warning about a crisis in these funds for over a decade, the governments of the Islamic Republic have tried to postpone the crisis with actions such as transferring assets and allocating large budgets annually.
The most serious warning about the crisis in the funds was given by Masoud Nili, the economic advisor to then-President Hassan Rouhani, in mid-2017. He stated that because the gap between the retirement age and life expectancy is among the largest in the world, it imposes a significant financial burden on the funds.
Nili described changing the retirement age as a difficult decision, which, according to him, might even lead to social challenges. For this reason, decision-makers have avoided addressing such issues and have postponed them to the future. It seems that now is the endpoint of that future.
Another warning was issued by Sajad Padam, the former director-general of social insurance at the Ministry of Labor, in May this year, which ultimately led to his dismissal. He expressed concern about the state of these funds, saying that we might reach a point where we have to sell Kish, Qeshm, and Khuzestan to pay retirees’ salaries.
The situation of pension funds has become more critical in the past two years because the government no longer has assets to transfer nor income to cover its debts to the funds. The only remaining solution is to increase the retirement age, which reduces new entries into the funds and postpones the new financial burden on the government’s general budget for several years.
In this regard, Morteza Afagh, an economic expert, stated in an interview with the ‘Entekhab’ website that the expectation of officials is that since the average age has increased, the problem will be solved, and there are laughable arguments in the parliament. The main issue is that incompetencies are being passed on to the public. During this time, they have compensated for their mismanagement with people’s income by increasing taxes.
Everyone is Protesting, From Top to Bottom
The protests and criticisms of the bill to increase the retirement age are so widespread that they are not limited to statements from independent labor organizations, which mostly lack power and whose voices are less heard by the authorities. The protests have started from labor activists, regardless of their political inclinations, and have reached Sadegh Amoli Larijani, the head of the Expediency Discernment Council.
Interestingly, within the parliament itself, the opposition voices to this decision are louder than the supporters. In recent days, members of the Labor Faction of the Iranian Parliament have written to the members of the Guardian Council, requesting the rejection of the bill to increase the retirement age and its review and amendment in the parliament.
Hassan Lotfi, the spokesperson for the Parliament’s Social Commission, stated in an interview with ILNA that he has personally explained the reasons for opposing this bill to Mohammad Bagher Ghalibaf, the Speaker of the Parliament, and now he and other opposing representatives hope that the Guardian Council will return this bill to the parliament.
Mojtaba Zolnour, the Deputy Speaker of the Parliament, also stated that there are strong legal and religious grounds for rejecting the bill to increase the retirement age and predicted that the Guardian Council will reject this bill.
However, amidst the small and large oppositions, the government hopes that at least half of the proposed 12-year increase in retirement age will be approved and implemented. Although Solat Mortazavi, the Minister of Cooperatives, Labor, and Social Welfare, is more optimistic, hoping that the parliament’s bill regarding the retirement age will be implemented from the beginning of 2026. Despite all this, even if the government achieves its goal of raising the retirement age cap, the pension fund crisis will not end. According to Kamran Nadri, an economics professor, passing this law alone will not solve the problems of pension funds in Iran, and attention must also be paid to the management of these funds, which has been politically chosen.
Meanwhile, the warning from 127 construction workers’ unions across the country is noteworthy. In a joint statement, they said that this government action is actually aimed at diverting public attention from the real livelihood problems of retirees and workers, which unfortunately has created a platform for protest, anxiety, and concern in society and discouragement and hopelessness among the organization’s partners.
