Chapter I. Basic objectives and methods of protection

I. Basic objectives

39. Under both Article 25 of Convention No. 102 and Article 14 of Convention No. 128, it is considered a basic principle that each Member for which the Part relating to old-age benefit is in force shall secure to the persons protected the provision of old-age benefit.

40. It is already clear, if one considers the Preamble of the Constitution of the ILO and the Universal Declaration of Human Rights, for example, that the international community as a whole has long recognised the need to protect older persons. The vast majority of countries have therefore taken steps to set up a system of old-age protection. This trend has become even more pronounced since the Second World War and there are few countries today which do not have social protection in this field. (Endnote 1) The number of countries without protection tends to decline and several governments have mentioned that they are studying the possibilities of setting up a social security system, often with ILO assistance. (Endnote 2)

II. Methods of protection

41. Unlike the instruments adopted before 1945, which advocated social insurance as being the only method of protection for the implementation of social security, (Endnote 3) both Convention No. 102 and Convention No. 128 have been drafted to be extremely flexible on this matter. As already stressed during preparatory work leading up to the adoption of Convention No. 102, a same general level of social security can be attained by different means. (Endnote 4) The Conference therefore deliberately refused to adopt a rigid terminology which would have been ill-suited to the particularly wide range of national solutions, still less to the rapid and constant developments in systems of protection. Convention No. 102 merely stipulates, under Article 71, paragraph 1, that the cost of national systems should be borne by way of insurance contributions or taxation or both. It also contains, as does Convention No. 128, several provisions of a general nature concerning the organisation and running of social security schemes. (Endnote 5) Finally, Article 6 of both instruments provides for the possibility, under certain circumstances, of taking account of insurance which is not compulsory by law for the persons to be protected. (Endnote 6)

42. Conventions Nos. 102 and 128 therefore allow account to be taken of the two basic concepts that have developed in the field of old-age protection and social security in general: compulsory social insurance based on employers' and workers' contributions which may or may not be subsidised by the State; and protection, which, although also compulsory, is funded by general taxation and provided to the population as a whole. It may be seen, from examining national situations, that the majority of schemes are based on the principle of social insurance. Under such schemes, entitlement to benefits is contingent upon the period of contribution or employment credited to the insured person, irrespective of any criterion of needs or means; and the rates are usually related to the beneficiary's previous earnings. There are many countries in which the social insurance scheme covers all contingencies; however, even in countries that have not yet reached this stage because of their economic and social development, the existing branches include old-age benefits in most cases. In other countries, on the other hand, the State directly provides flat-rate benefits which are financed entirely or mainly by public funds. Old-age pensions under these schemes are usually paid to all members of the population who have reached a certain age, although account is often taken of various conditions related to the beneficiary's residence, income or other means. Although there was originally a clear distinction between social insurance benefits and benefits provided as a public service, some of their intrinsic characteristics tend today to be blurred. Various methods are also often combined under national schemes. For instance, the legislation of some countries provides for a basic pension, usually at a flat rate for all residents, and for a complementary or supplementary pension for all or part of the economically active population. (Endnote 7)

43. In many countries, alongside the general social security schemes, there are special schemes covering certain categories of workers, such as the self-employed, (Endnote 8) farmers and/or agricultural workers, (Endnote 9) miners (Endnote 10) and seafarers. (Endnote 11) The great majority of governments that submitted reports also pointed out that they have a special pension scheme for public servants, as public authorities often wish to provide preferential conditions for their staff. (Endnote 12) In some countries, public servants are still the only occupational category to receive pensions. (Endnote 13)

44. The various methods of protection described above are all likely to meet the standards contained in Conventions Nos. 102 and 128. However, in several countries, the legislation provides for workers' old-age protection by way of provident funds which also cover the contingencies of disability and loss of the bread-winner. (Endnote 14) As a rule, these funds are financed by workers' and employers' contributions and are administered by the State; they pay out a lump sum to beneficiaries when they reach a prescribed age and fulfil various conditions. This lump sum is usually equal to the sum of contributions, plus interest, which is credited to the worker's account. Unlike in social insurance, there is therefore no pooling of risk among the participants. Although they are funded by contributions and administered by the State, these funds do not comply with the objectives stated by Convention No. 102 and Convention No. 128, in so far as they do not, in principle, (Endnote 15) guarantee benefits in the form of periodical payments, as provided for by these instruments. (Endnote 16) These schemes may constitute a first step towards a more comprehensive protection of workers -- as borne out by the conversion, in several countries, of provident funds into pension schemes. (Endnote 17) Indeed, several countries are at present envisaging converting their provident funds into social security schemes. (Endnote 18) Protection granted under various national schemes is often supplemented by specific social protection measures to help those without means who do not meet the statutory qualifying conditions for old-age benefits, or who are paid benefits that are inadequate to cover their basic needs.

45. Alongside statutory old-age protection schemes, there are, in many countries, private pension schemes created either within the enterprise or at occupational or inter-occupational level. Whether these are unilaterally set up by employers for their staff or -- as is often the case in Europe -- they result from collective bargaining, these schemes pay workers benefits which are added to those under the statutory social security system; in some instances, they even partially replace statutory benefits. (Endnote 19) According to information communicated by governments, private pension schemes constitute the only form of workers' protection in the private sector in some countries. (Endnote 20)

46. In order to take account of these private schemes and allow for flexibility, Convention No. 102 and Convention No. 128 both make special provisions under their Article 6. They state that protection effected by means of insurance, which is not compulsory by legislation, may be taken into consideration in the case of old-age benefits, (Endnote 21) when they fulfil the following conditions. First, the protection provided for under these provisions can only be taken into account in the case of an insurance scheme. Schemes where a policy is taken out with a life insurance or pension insurance company for a specific group of persons may therefore, in principle, be taken into account, as may pension funds in the strict sense of the term, whose regulations establish the conditions relating to coverage, benefits and contributions, etc.; in this context, benefits that are merely paid out by the employer, without insurance or reinsurance, do not comply with the above-mentioned Article 6. Second, these insurance schemes must be "supervised by the public authorities or administered, in accordance with prescribed standards, (Endnote 22) by joint operation of employers and workers", to ensure certain guarantees as to their administration. Third, these schemes must cover a substantial part of the persons whose earnings do not exceed those of the skilled manual male employee to ensure that they cover to a very great extent those with average or low occupational earnings. Finally, these schemes must comply, in conjunction with other forms of protection, where appropriate, with the relevant provisions of the Convention; i.e., in the case of old-age benefit, to the provisions contained in Part V of Convention No. 102 and Part III of Convention No. 128, as well as to the general provisions in these instruments. When these conditions are met, it is possible, under Article 6 of Conventions Nos. 102 and 128, to add together persons protected under non-compulsory insurance schemes and those under compulsory statutory schemes, in order to apply the provisions contained in these instruments as to coverage. Furthermore, when occupational schemes cover the same group of persons as the statutory schemes, the supplementary benefits paid by the voluntary insurance schemes may also be taken into account to reach the level prescribed by the instruments.

47. Although many countries (Endnote 23) have mentioned the existence of private old-age protection schemes, only very few (Endnote 24) have referred to them as being a method of protection likely to give effect to the instruments under consideration; therefore, governments have not provided information necessary to make it possible to assess whether these schemes comply with the conditions under Article 6 of Convention No. 102 or Convention No. 128. Some countries even mentioned that this was not the case. (Endnote 25) Others specified that they had not taken account of private protection schemes in their replies. (Endnote 26)

48. The lack of detailed information from governments on the existence of private insurance schemes may be explained by the fact that the extent of protection they offer is extremely variable -- even when they are co-ordinated with the statutory scheme -- as they often depend upon the personnel policy within the enterprise. The significance of this type of protection, especially in the industrialised countries where private schemes cover a large part of the working population, should not however be overlooked because of this lack of information. (Endnote 27) In several countries, complementary schemes which were initially agreed upon under collective agreement have been made legally binding for all workers or some categories of workers, (Endnote 28) although it is true that, in other countries, however, the percentage of workers benefiting from these schemes is still low.

49. Article 6 of Convention No. 102 and Convention No. 128 may also apply to voluntary statutory schemes. Indeed, there are many social security laws and regulations enabling certain categories of workers which they do not or no longer cover, to join or to continue to belong to the general scheme or special schemes, when specific conditions are fulfilled. (Endnote 29)

50. The basic objectives and possible methods of protection contained in these instruments therefore represent a unified set of ideals which first originated with the emergence of modern social security itself -- and which are still valid today. There is no denying that the objectives of Conventions Nos. 102 and 128 are adhered to more closely in the case of compulsory social insurance schemes; however, the role of voluntary schemes, which are extremely widespread in some countries, has not been overlooked -- far from it -- provided, of course, that they afford equivalent protection to that offered under statutory schemes. It may therefore be seen that these instruments, when defining old-age protection, not only succeed in clearly setting out objectives but allow for a certain amount of flexibility and are realistic in their approach to the various methods of protection available.

Endnotes

Endnote 2

Endnote 3

Endnote 4

Endnote 5

Endnote 6

Endnote 7

Endnote 8

Endnote 9

Endnote 10

Endnote 11

Endnote 12

Endnote 13

Endnote 14

Endnote 15

Endnote 16

Endnote 17

Endnote 18

Endnote 19

Endnote 20

Endnote 21

Endnote 22

Endnote 23

Endnote 24

Endnote 26

Endnote 27

Endnote 28

Endnote 29

Cross references
Constitution: Article 19
Constitution: Article 22
Constitution: Article 35