Civil Servants Pension Fund Planning to Downsize

EghteadOnline: The Civil Servants Pension Fund is planning to cede either portions of its shares or total ownership in 99 of its subsidiaries, most of which are underperforming and bleeding cash.

News ID: ۷۸۳۷۳۸

19 August 2018

“In line with the government’s policies to give up business ownership and moving toward shareholding, a number of the fund’s subsidiary companies will soon be sold at Tehran Stock Exchange and Iran Fara Bourse,” said CSPF’s Director Jamshid Taqizadeh on Thursday.

According to the official, 67 of the companies that are making losses will be prioritized for giving up their total ownership, CSPF reported on its website.

“Nine profit-making companies will be sold, he added, as their business focus is at odds with CSPF’s investment goals.

According to Financial Tribune, Taqizadeh noted that CSPF aims to reduce its shares in 23 other companies to below 40%.

“Most of the sales will take place in holdings such as Atieh Saba [focused on transportation, tourism and mining], as well as those focused on food industries, pharmaceuticals and energy,” he said.

“Considering the country’s economic situation, we are expecting 1.8-2 trillion rials ($225-250 million) in profits this year (March 2018-19).”

This is while the fund pays out 3.2 trillion rials ($400 million) in pensions every month. Apart from monthly payments by government employees, CSPF’s coffers are fed by other sources, but the disparity between companies’ lower-than-expected earnings and the fund’s high financial commitments have obliged it to let go of underperforming shares and look for other financing methods, such as the capital market.

CSPF owns extensive stakes in several entities, including but not limited to Jam and Amir Kabir petrochemical companies, Iranol and Pasargad oil refineries, Ahvaz and Saba steel, Pegah Dairy, National Iranian Tanker Company, Islamic Republic of Iran Shipping Lines and Aseman Airlines.

Not Alone

The Civil Servants Pension Fund is not alone in its troubles. There are 24 pension funds in the country, which are divided into public pension funds (Social Security Organization, the Armed Forces Pension Fund, CSPF and Rural and Nomadic Insurance Fund) and exclusive funds (funds for employees of the Islamic Republic of Iran Broadcasting, Oil Ministry, banks, Central Insurance of Iran and municipalities).

Most of the above funds are struggling to keep their heads above water due to their low support ratio, early retirement and underperforming assets. Steel industry retirees, for instance, have repeatedly staged protests decrying delayed payments for months.

Yet what’s most sobering is SSO and CSPF’s condition, as they account for more than 73% of the total number of abovementioned funds, according to the Persian daily Shargh.

SSO has more than 3 million pensioners and the ratio of its insured workers to its pensioners is 4.25. CSPF, on the other hand, has more than one million first named insured while the number of its pensioners exceeds 1.2 million, indicating that pensioners outnumber the employed insured population.

In the fiscal 2016-17, premiums made up only 21% of pension funds’ revenues, and profits gained through the investment of funds and sale of assets only accounted for 8% of resources, leaving the government to shoulder the costs of the funds.

SSO has employed similar tactics to overcome the issue. Its investment arm, Social Security Investment Company, has been mulling the sale of its assets for a few years now. Its latest move was to sell a 16% stake in its giant Tamin Petroleum and Petrochemical Investment Company with a nominal capital of $1.82 billion.