Evaluation of financial equilibrium for Islamic Republic of Iran’s military pension fund and providing solutions for it’s stability

Hosseini, Seyyed Shamseddin; Adabi Firouzjaee, Mohammad Bagher

Evaluation of financial equilibrium for Islamic Republic of Iran’s military pension fund and providing solutions for it’s stability

Document Type : Original Article

Authors

¹ Assistant Professor at Faculty of Economics, Allameh Tabatabei University, (s.hosseini@atu.ac.ir)

² Faculty member of the Institute of Business Studies and Research, (bagheradabi@gmail.com)

Abstract

The main objective of this study is to evaluate Islamic Republic of Iran’s military Pension Fund financial equilibrium and to present solutions for improving its financial sustainability. In this regard, financial expenditure of this fund is defined as Pensioners’ salaries while its financial resource includes retirement deduction (22.5 percent of the salary of employees) and investment income. At the first step, financial deficit of the fund (the difference between expenditures and resources of this fund) is estimated, using descriptive and statistical methods. The results show that in the current situation, the existing resources of the military Pension Fund will only be able to cover 25% of its expenditures without government assistance. In other words, 75% of retirement benefits are provided from the state budget. Also it is estimated that in the next 10 years (at the end of the year 1406 Hijri Shamsi), the resources of the fund will be able to provide 20 Percent of retirement benefits. One of the ways to improve the financial sustainability of this fund is to grow assets of this pension fund so that investment income provides all or a greaeter share of retirement benefits. The resources needed to finance one-third, two-thirds or all of the fund's expenditures is estimated using scenario method. For example, if the fund's purpose is to finance one third of its expenditures at the end of 1406, assuming that the return rate is equivalent to the average long-term economic growth rate (5.7%), 172.5 trillion Tomans of asset is required. While, to finance two-thirds or all of the fund's expenditures, 351.4 and 524 trillion Tomans of asset are required respectively.

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