Why Pension Funds could face Bankruptcy Tsunami

By Navid Kalhor, for Al-Monitor. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iran Business News.

One of the key underlying economic challenges of Iran is the current underfunding of its pension system. Make no mistake: Pension reform must be a priority for the country.

Figures posted by the Ministry of Cooperatives, Labor and Social Welfare show that “a major portion of pension funds have either gone completely bust or are among the ones relying tremendously on state resources,” reported Eqtesad News on Jan. 23.

The most important issues are the imposition of financial obligations by consecutive administrations over the past four decades as well as the approval of populist legislation by various parliaments, and particularly under the previous conservative government. Combined with the pension funds’ own financial problems, the situation is truly dire.

By politically influencing the pension reserves, consecutive governments have mismanaged the assets owned by these funds. At present, most of them are accumulating large, unsustainable and unfunded pension liabilities. In this vein, problems concerning equity, efficiency and management are pervasive.

In an interview with business weekly Tejarat-e-Farda on Oct. 8, 2016, Mohsen Riazi, the deputy of the social and economic planning office at the Social Security Organization (SSO), said, ”Policies such as early retirement in difficult and hazardous occupations and renovation of industries that have played a great role in the financial misbalance of the largest pension fund in the country [belonging to the SSO] date back to the Reformist government [1997-2005].”

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