Title: Iran’s 2026 Pension Reforms: A Comprehensive Guide to Salary Increases and Alignment
Introduction: A Significant Boost for Pensioners
In line with the state’s approved budget and the mechanisms established in the Seventh Development Plan, the Iranian government has outlined a comprehensive formula for calculating pension increases for the upcoming year 1405 (2026). This structured approach ensures that pension adjustments are not limited to a standard annual raise but incorporate a significant alignment component, bringing the income of many state pensioners closer to that of their active counterparts.
The Multi-Faceted Pension Calculation Formula
The methodology for determining state pensioners’ benefits in 1405 is based on four core components, creating a multi-stage structure designed for substantial income enhancement:
- The final salary from the previous year’s decree.
- The application of a standard 20% annual increase.
- The calculation of the second phase of the “pension alignment” plan.
- The addition of the final alignment adjustment to the base pension.
In practice, a pensioner’s base salary is first increased by the standard 20%, after which a separate alignment adjustment is calculated and added to the final amount.
The Role of the 20% Annual Increase
As stipulated in the 1405 budget directive, the government has maintained the 20% salary increase coefficient for state employees, which is centrally applied to pensions. The initial calculation is straightforward:
Step 1: The pensioner’s final salary from the end of 1404 is multiplied by 1.20.
Example: For a pensioner receiving 16 million Tomans per month in 1404:
- 16,000,000 × 1.20 = 19,200,000 Tomans (base pension for 1405).
This, however, is only the first part of the calculation, with the more impactful pension alignment phase yet to be applied.
Implementing the Pension Alignment Plan for 1405
According to the Seventh Development Plan, the pension alignment process for state retirees is a three-year initiative:
- Year One (1403): Pensions were raised to 40% of an equivalent active employee’s salary.
- Year Two (1404): The alignment process continued.
- Year Three (1405): Pensions will reach 90% of the salary of equivalent active employees.
This final phase in 1405 will substantially minimize the income gap between retirees and active staff.
Calculating the Final Alignment Adjustment
The specific adjustment for the alignment plan is calculated based on data from previous years’ salary decrees. The amount designated for alignment in the 1404 decree is used to determine the total alignment value equivalent to 90% of an active employee’s salary. This figure is then multiplied by 30% to arrive at the second-phase alignment increase, which is finally added to the pensioner’s adjusted base salary.
The Complete Formula for 1405 Pensions
The simplified, final formula for a state pensioner’s salary in 1405 is:
Final Pension = (Final 1404 Salary × 1.20) + Second-Phase Alignment Increase (30% of total alignment value)
This combined structure means the total income increase for pensioners in 1405 will be significantly higher than the base 20% raise alone.
A Note on Different Pension Systems
It is important to distinguish that this calculation formula applies specifically to state pensioners. The method for calculating pensions for those under the Social Security Organization is entirely separate, being based on the average salary of the last two years of employment, insurance payment history, and independent directives from the Social Security Organization.
Conclusion: A Substantial Step Towards Income Parity
The officially announced pension structure for 1405 combines a 20% annual increase with the crucial second phase of the alignment plan. This integrated policy is set to deliver a significant rise in the final income received by state pensioners, marking a major step in reducing the wage disparity between retired and active public service employees.