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 that awaits the final opinion of the Guardian Council. Numerous opponents in the media and social networks have even described it as un-Islamic and forbidden.
Although it is likely that this resolution will not pass through the Guardian Council, the volume of criticism towards the parliament’s decision to raise the retirement age in Iran has reached a point where Sadeq Amoli Larijani, the head of the Expediency Discernment Council, has reacted and described this decision as unprofessional.
The retirement age is one of the most challenging decisions for governments in most countries worldwide, often opposed by labor groups. According to the parliament’s resolution, the retirement age for women and men will generally increase to 57 and 62 years, respectively. However, this resolution introduces a new calculation method where the retirement history varies with different age coefficients, and based on the work history so far, additional years are added to the required history for retirement.
For example, if you are 20 years old and start working today, you need to work for 42 and a half years to retire, or someone who has worked for six years so far must work another 34 years and pay insurance premiums to retire unless they reach the age of 62 before this time limit. The retirement age ceiling varies in different countries, from 67 years in Australia, Denmark, and Norway to 65 years in the USA and UAE, 64 years in Japan, 60 years in Turkey, and 59 years in Saudi Arabia.
The retirement age standards vary across different countries worldwide, generally depending on life expectancy, climatic conditions, and work environment. However, the reason for the controversial parliament resolution to add 12 years to the retirement age is neither increased life expectancy nor improved climatic conditions or even work standards. Instead, it is the government’s inability to fill the empty treasury of pension funds, which in some years have consumed the equivalent of the entire annual oil revenue of Iran and have been the focus of many economic experts and media, especially in recent months.
Morteza Kazemi, an economic analyst, in a television interview with the media ‘Tomorrow’s Economy,’ stated that one of the issues of pension funds is the budget deficit, but the main issue is not just that. Between 15 to 20 percent of the government’s general budget, approximately 350 trillion tomans, is allocated to two pension funds, forming between 30 to 50 percent of the government’s budget deficit.
The Shadow of Fear Over Future Generations
If empty pension funds are referred to as the scariest phenomenon of the new century in Iran’s economy, as some experts say, it is not an exaggeration. Although economic experts had warned about the impending crisis in these funds a decade ago, the Islamic Republic governments attempted to delay the fund crisis with actions including asset transfers and allocating large budgets each year.
The most serious warning about the critical situation of the funds was issued by Masoud Nili, the economic advisor to then-President Hassan Rouhani, in mid-2017. He said that because the gap between retirement age and life expectancy is one of 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, as he put it, decision-makers avoided addressing these issues and postponed them to the future. It seems now is the end 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 or income to cover its debts to the funds. The only remaining solution is to increase the retirement age, which reduces new entries to 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, said in an interview with the website ‘Entekhab’ that the gentlemen expect that since the average age has increased, the problem will be solved, and there are laughable arguments in parliament. The essence of the matter is that incompetencies are linked to the people’s pockets, and 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 resolution to increase the retirement age are so widespread that they are not limited to statements from independent labor organizations, which generally have no power and whose voices are rarely heard by the authorities. Protests have started from labor activists, regardless of their political inclinations, and have reached Sadeq Amoli Larijani, the head of the Expediency Discernment Council.
Interestingly, even within the parliament, the voices opposing this decision are louder than those in favor. In recent days, members of the Iranian Parliament’s Labor Faction have written to the Guardian Council members, asking them to reject the resolution to increase the retirement age and to review and amend it again in parliament.
Hassan Lotfi, the spokesperson for the Parliament’s Social Commission, said in an interview with ILNA that he has personally explained the reasons for opposing this resolution to Mohammad Bagher Ghalibaf, the Speaker of the Parliament, and now he and other opposing representatives hope that the Guardian Council will return this resolution to the parliament.
Mojtaba Zolnour, the Deputy Speaker of the Parliament, also said that there are strong legal and religious grounds for rejecting the resolution to increase the retirement age and predicted that the Guardian Council will reject this resolution.
The government, however, amid all these large and small oppositions, hopes that at least half of the 12 years proposed as an increase in the retirement age will be approved and implemented. Although Solat Mortazavi, the Minister of Cooperatives, Labor, and Social Welfare, is more optimistic and hopes that the parliament’s resolution on 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 ceiling, 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 politically selected funds.
Meanwhile, the warning of 127 construction workers’ unions across the country is noteworthy, stating in a joint statement that this government’s action is essentially aimed at diverting public attention from the real livelihood problems of retirees and workers, which unfortunately creates a platform for protest, anxiety, and concern in society and leads to disillusionment and despair among the organization’s partners.
