Iran’s pension system faces a critical situation. While media reports highlight the country’s rapidly aging population, the reality is a system on the verge of collapse.
The Regime’s Patchwork Approach
The government has addressed the issue through political maneuvers, not sustainable solutions. Policies like exemptions and privileges for specific groups have burdened contributing workers without providing adequate benefits.
A Failing System
The current structure struggles to achieve its goals. Poverty among the elderly is prevalent, with average incomes falling below the poverty line. In 2023, nearly 70% of payments for three-member families were insufficient.
Low Coverage, High Costs
Only a fraction of the working-age population contributes (31%), resulting in limited coverage for retirees (35-40%). This creates a financial imbalance, with high costs and inconsistencies further straining the system. The deficit linked to pension funds is comparable to the national budget deficit, and this gap is widening.
Mounting Debts, Insufficient Resources
Government debts to the pension system have skyrocketed since 2010, with no sign of slowing. Even if the Social Security Organization recovers all government debts and sells its assets, it can only meet 15% of its future obligations. This percentage is even lower for government employees (8-14%).
Causes of the Crisis
Several factors contribute to this crisis:
- Demographic Changes: An aging population strains the system. This is partly due to political interference and unfavorable economic conditions.
- Economic Challenges: Since 2007, the economy has struggled to generate wealth. Inflationary stagnation has worsened the situation for pension funds.
- Management Issues and Corruption: Embezzlement and mismanagement have depleted resources.
- Unsustainable Policies: Political interference, early retirement programs, and exemptions have exacerbated the problem.
Warnings Ignored
Warnings about the unsustainable path began as early as 2002, highlighting population growth and potential social security challenges. However, a lack of comprehensive economic and social policies has allowed the crisis to fester.
Unstable Finances and Unequal Burden
The government’s non-payment of social security contributions reflects an imbalanced distribution of resources. The current debt represents 25% of the national budget. If this continues, the social security deficit could reach 3.5 times the entire national budget within two decades.
A Growing Elderly Population
Currently, 7% of the population is elderly, but this will rise to 26%. Today, over 60% of seniors lack adequate support, with 40% living below the poverty line.
Printing Money Isn’t a Solution
The government’s reliance on money printing to finance pension funds fuels inflation, placing the burden on society through higher prices. This approach fails to address the core issues.
Conclusion: A Government Unable to Cope
The government’s failure to tackle the crisis directly contributes to the problem. Embezzlement further weakens the system. Without investment and a comprehensive strategy, Iran’s social security system faces imminent collapse.