Case study D: Challenges of pension funds in Iran
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The Iranian pension system is different from that of other countries in MENA region, by the highest wage replacement rate, the highest contribution rate for pension and without any non-contributory pension scheme for employees. Recently, pension system in Iran has faced considerable financial sustainability challenges. To trace the reasons, this case study explains some factors such as demographic issues and political interventions. Thus, it describes briefly the pension system in terms of coverage, comprehensiveness and adequacy as well as analyzing the main factors of financial unsustainability of Iran’s pension schemes. Reviewing policy recommendations by some international research institutions, this study argues that their suggested solutions are mainly based on a technical approach and hardly could reduce pension funds deficits, and even may worsen the pensioners’ standard of living. Instead, this study suggests some alternative strategies like abolishing employer's exemption from insurance payment and add new tax resources to the welfare system.