Why Pension Funds could face Bankruptcy Tsunami

Riazi also reiterated that the Health Reform Scheme modeled on Obamacare that is implemented by President Hassan Rouhani or increasing retirees’ monthly pension payments by 800,000 rials ($25) at the end of the first term of Mahmoud Ahmadinejad’s presidency (2005-2009) could be referred to as “embittering policies” exerted on the SSO, shrinking its meager financial resources to a minimum.

Another issue aggravating the dire situation of pension funds is the protective laws ratified by lawmakers who consistently have passed populist bills supposedly in support of vulnerable groups in society. Parliament Speaker Ali Larijani, who is also the deputy head of the parliamentary economic commission, has addressed parliamentarians’ approval of bills relevant to pension funds, saying, ”In the previous [parliamentary] terms, occasionally the members of parliament conducting their duties as representatives suffered from politicization and made rash decisions.”

He added, “This brought about a crisis for pension funds, and sadly, the resulting actions of the preceding parliament [2012-2016] are not very defensible.”

Indeed, in a session held on Jan. 15, members of parliament — without counseling appropriate expert agencies such as the parliament’s Research Center or conducting any other conventional investigations — voted for a bill on the early retirement of working women who have merely contributed payments to their respective pension funds for 20 years, without pushing for any age limit.

This is while no actuarial calculations of such a decision and its likely impact on fund assets have ever been carried out. That being said, preliminary estimates indicate that the move will cost pension funds some 1,000 trillion rials ($31 billion) collectively over five years alone.

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