Old-Age Insurance (Industry, etc.) Convention, 1933 (No. 35) - Chile (RATIFICATION: 1935)

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A Government representative first referred to the current social insurance system and the ILO's contribution to its development. She said that income protection for the elderly was a fundamental component of the current system of social protection in Chile. The basis of this system of social protection was the Social Insurance Structural Reform of 2008 of the Individual Capital Accumulation Social Insurance System that had existed since 1981. The recent reform was based on the Solidarity Pensions System, called the "solidarity pillar", which covered those who, for various reasons, had not been able to save enough to constitute a decent pension. The reform provided protection to all the country's workers, including salaried employees, self-employed workers, permanent, seasonal and temporary workers, both men and women. The coverage provided by this new social insurance system was universal.

She considered that the new system rewarded personal savings and efforts: those who contributed more to the system would enjoy higher pensions. It also was a reform that supported those who had been left behind: it was not acceptable that old age or retirement should be synonymous with poverty or a sudden deterioration in living conditions. The new system not only supported the poor, but the middle class would also find a real space in the pension system, with the assurance that their efforts and savings for the future would be duly protected and compensated. Greater security not only contributed to equity, but also to growth. When people felt safer, they were more likely to be bold, take initiatives, innovate and give effect to their best ideas in practice, thereby generating wealth and prosperity.

Historically, the ILO had been critical of the Chilean Individual Capital Accumulation Social Insurance System set out in Legislative Decree No. 3.500, which had been implemented in Chile since 1981. That system, despite the fact that it was articulated with other institutional and economic reforms for the development of a capital market and promoted a phase of growth, violated the basic principles of the social security systems promoted by the ILO based on tripartism. In this respect, the solidarity, coverage, gender equity and lack of representation of beneficiaries constituted aspects that precluded its social legitimacy. In this context, the ILO had published studies criticizing the system as early as 1992. Between 2001 and 2003, in accordance with the conclusions concerning social security adopted by the Conference of 2001, the Office had undertaken technical cooperation to identify priority aspects of the reform. Based on this work, in 2002 the Social Security Department in Geneva, together with the ILO Office for the Southern Cone of Latin America, and the Directorate of the Budget of the Ministry of Finance of Chile, had signed an agreement to carry out a project for the development of a model for the financial protection of the pension system in Chile, initiating the design of a model to estimate the costs of the various components of the existing system and to train officials in the area of social insurance. As a result of this cooperation, a book had been published in 2003 on the financing, coverage and implementation of social protection in Chile between 1990 and 2000, which demonstrated the level of fragmentation of social insurance and cash subsidies, together with their impact on coverage.

In 2004, together with the Ministry of Labour and the "Fundación Chile 21", the ILO had organized an international seminar on the future of social insurance in Chile. The social partners, experts and members of Parliament had been convened to identify ways of reforming the system. ILO assistance was maintained through a project to support the Budget Department in the process of social insurance reform, its contribution to the development of an actuarial model, and an in-depth analysis of the interaction of labour market dynamics and social security implementation.

In 2006, the formulation of the draft reform had been initiated in Chile, and the ILO's contribution had been essential, both in the diagnostic phase of the model and in the final design of the Proposal for Social Insurance Reform which had been enacted in March 2008 in the form of Act No. 20255. It was the most significant social reform in fiscal matters undertaken for the past 20 years. An essential step in securing this reform had been the prior creation of a Pension Reserve Fund. An actuarial system would make it possible to evaluate the sustainability of this fund every three years, with the first evaluation being carried out this year. Projections for the number of beneficiaries obtained through the model indicated that the Solidarity Pension System would increase from an estimated 600,000 beneficiaries in December 2008, to approximately 1,200,000 beneficiaries in December 2012.

The second item addressed was Chile's replies to the recommendations contained in Document GB.277/17/5 of March 2000. With regard to the pension system established by virtue of Legislative Decree No. 3.500 of 1980 and the recommendation that it should be administered by non-profit-making organizations, she indicated that the administration of the system was being transferred to the Institute for Labour Security (ISL), the Institute for Social Provision (IPS), Pension Fund Administrators (AFPs) and Unemployment Fund Administrators (AFCs). ISL and IPS were public entities, while AFPs and AFCs were private non-profit-making entities.

With reference to the recommendation that the representatives of the beneficiaries should participate in the administration of this system, in accordance with conditions established by national law and practice, she said that, since the Social Insurance Reform of 2008, the system's users had been instrumental in monitoring its implementation and operation, as well as in its evaluation and the formulation of policy proposals intended to strengthen its development. The new system incorporated a Board of Pension System Users, an entity with the role of informing the Sub-Secretariat for Social Insurance and other public bodies in the sector of the evaluations made by its representatives of the functioning of the pension system, and of proposing strategies to educate and inform the population about the system.

With regard to the recommendation that employers should contribute to the insurance system, she said that the employers contributed to the social insurance system created by the reform through the financing of contributions to fund the scheme as set out in section 59 of Legislative Decree No. 3.500 of 1980, namely survivors' insurance, and that the financing of the compulsory employment injury, health and unemployment insurance was maintained.

She then provided replies to the recommendations made in the report adopted by the Governing Body concerning the representation made by the College of Teachers of Chile AG under article 24 of the Constitution (Document GB.298/15/6 of March 2007). Firstly, she referred to the recommendation to take all the necessary measures to solve the problem of the social security arrears arising from non-payment of the further training allowance. She indicated that, to solve the problem of social security arrears in public, municipal and privately subsidized education, the system for controlling subsidies had been strengthened by reinforcing the inspection mechanisms controlling the use of State resources allocated to the sector for the purposes for which they were intended, including wage payments and contributions to the social insurance system. She also emphasized the increased number of inspections undertaken by the Labour Directorate.

She added that, in cases of judicial action, since March 2008, Chile had been gradually implementing an unprecedented reform of the labour courts which had significantly shortened the duration of cases, and had had a positive dissuasive impact on violations of the law. In the new court system, workers who did not have the means to pay for their defence had access to free legal assistance through a Programme for Labour Defence which provided appropriate, specialized and high-quality advice to workers.

With regard to the recommendation to ensure the application of dissuasive sanctions in the event of arrears in the payment of the allowance, she indicated that there existed a complex structure of remuneration that complicated the determination of the exact amounts to be paid, in the event of arrears in the payment of allowances, which was why both the General Inspectorate of the Republic and the Labour Directorate needed to resolve these matters. With regard to employers in the municipal education sector, in which most of the problems occurred, the Organic Municipal Act had been amended to duly sanction any mayor whose municipality failed to pay the contributions due, including of course the insurance contributions of its workers, and those of teachers. Based on the definition of what constituted a "significant neglect of duties", the penalty provided for was removal from office and ineligibility to hold certain public offices, which were drastic measures intended as deterrents for any failure to comply with laws of any nature, including those related to social insurance. Moreover, the Social Insurance Reform of 2008 had given mayors and other authorities greater responsibility in relation to failure to pay social insurance contributions, which were deductions for that purpose from the wages of public employees, in which case the provisions of sections 12 and 14 of Act No. 17322 or subsection 23 of section 19 of Legislative Decree No. 3.500 of 1980 would apply; with the offence being considered a serious violation of the principle of administrative integrity envisaged in section 52 of Act No. 18575, the Organic Constitution of the General Bases of the State Administration, the reformulated, coordinated and systematized text of which had been established by Legislative Decree No. 1 of 2001 of the Ministry of the General Secretariat of the Government.

Mayors who committed the above violation would be removed from office on the grounds provided, set out in section 60(c) of Act No. 18695, the Organic Constitutional Bases of Municipalities, the reformulated, coordinated and systematized text of which had been established by Legislative Decree No. 1 of 2006 of the Ministry of the Interior. The same sanction would apply to town councillors who committed such offences when acting as substitute mayors.

The General Inspectorate of the Republic, at its own initiative or at the request of any elected municipal officer, would conduct the necessary investigations. This did not prevent the drawing up of administrative investigations intended to enforce the responsibilities of municipal councillors.

With respect to the so-called "historic debt" of social security resulting from the non-payment of full wages in conformity with Legislative Decree No. 3.551 of 1981 to nearly 80,000 teachers who had been deprived of their wages, which had consequently affected their social security entitlements since 1981, she indicated that this was a political demand by workers in the education sector regarding a certain special allowance that they had been granted on a "non taxable" basis or, in other words, which was not taken into account for the calculation of the social insurance contributions. It was a political demand, and the fact that discussions were being held in the Chilean National Congress, in a Special Commission on "historic debts" in the Chamber of Deputies, reflected the interest of these bodies in understanding this demand. Although the Congress had no authority to propose laws that involved fiscal expenditure, it was examining in the above commission the various historical claims and demands of its citizens so as to formulate a position on the matter and establish priorities in the social and political agenda.

With respect to the observations made in January 2008 by the Circle of Retired Police Officers alleging the loss of acquired rights relating to old-age pensions (quinquenio penitenciario) by prison staff, she reported that the benefit referred to had been established under Legislative Decree No. 2 of 1971 of the Ministry of Justice issued by the President of the Republic in accordance with the powers set out in section 117 of Act No. 17399, and had benefitted the staff of the prison service (now the Gendarmerie of Chile) between 2 January 1971 and 31 December 1973. As of 1 January 1974, Legislative Decree No. 249 of 1973 respecting the single salary scale had introduced this single and uniform remuneration system for all workers in the public sector in the institutions listed in the legislative text itself, including the prison service; it expressly abolished all wage schemes existing on 31 December 1973, including that of the prison service, with no exception being allowed for the quinquenio penitenciario. As the retirement pensions of the staff covered by the Carabineros Social Insurance scheme (the former Insurance Fund for Carabineros) were based on the taxable revenue registered on their pay slips, the quinquenio penitenciario had been taken into account as payments to officers of the former prison service who had left the institution with pension entitlements when this allowance was still paid, that is between 2 January 1971 and 31 December 1973. Therefore, as the quinquenio penitenciario had no longer been paid to prison staff from 1 January 1974, the pensions of officers reaching retirement age after this date were determined without taking this allowance into consideration, as it no longer formed part of the total legal remuneration for this purpose.

In general, Chilean public employees still maintained their claims concerning changes in the components of their wage structure, but considering that they were public employees governed by their conditions of service, these changes were adopted by law. In this context, they were political claims, rather than failures by the institutions that employed them to comply with their obligations. The changes in allowances were related to changes in the structure of the services, the modernization of systems and other factors. As some of these statutory changes had been made without consultation or negotiations with the organizations, the Government understood the workers' position on this point. However, the capacity to analyse and resolve all the issues raised by public employees in practice had to be reconciled with other urgent matters in the country.

The Government understood that the workers' demands were related to the possibility of increasing their social insurance funds, possibly based on a contribution associated with the allowance. In this context, priority had been given to examining direct solutions to improve the retirement conditions of civil employees. A series of retirement laws had been adopted in consultation with trade unions, and other measures had been implemented to ensure that workers did not lose income and could retire. One example was the granting of a lifelong monthly supplement to retirees in the public sector thereby increasing their pension. This initiative, the Post-Employment Supplement, had been in force since 1 January 2009 with the adoption of Act No. 20305.

In addition to the Post-Employment Supplement, each branch of the public sector was currently governed by special laws, negotiated on a sectoral basis to improve retirement conditions. For the central State administration, Act No. 20212 had been adopted to cover the demands of the group of fiscal employees concerning the social insurance deficit in this sector; for the municipal education sector, Act No. 20158 had been adopted; for the municipal health sector, it was Act No. 20157; and for municipal employees Act No. 20198.

The Employer members thanked the Government representative for the detailed information provided and recalled that the present case had been marked out by a double footnote by the Committee of Experts and was being discussed against the background of the economic crisis. They further recalled that Chile had been the first country to ratify Convention No. 35, which had only been ratified by 11 countries, and had been denounced by one country. The Cartier Working Party had classified Convention No. 35 among the outdated instruments, which also included the Conventions that had been shelved and those that the Governing Body had invited Members to denounce, while inviting them at the same time to ratify more recent Conventions on the same subject, and in the present case the Invalidity, Old-Age and Survivors' Benefits Convention, 1967 (No. 128).

They noted that Article 10 of Convention No. 35 was central to the comments of the Committee of Experts and the main reason why the case was being discussed. The case had been the subject of comments by the Committee of Experts since 1983 and had been discussed by the Conference Committee on five occasions, most recently in 2001. The case had initially been triggered by the introduction of a new old-age pension system in 1980 by Legislative Decree No. 3.500, and the present review related to the economic crisis. Under the terms of the Convention, the pension system had to be administered by non-profit- making institutions with the participation of representatives of the persons insured. These conditions were not met by the new pension system.

As the new system was in clear breach of the Convention, the only solution for Chile was to denounce the Convention in order to maintain the new system, which was largely functioning successfully. Although the Governing Body had invited parties to Convention No. 35 to ratify Convention No. 128, it should be noted that, with regard to the administration and funding of pensions, Convention No. 128 did not differ from Convention No. 35. The Employer members therefore considered that the present discussion was somewhat strange. Although they agreed with the Governing Body decision to classify Convention No. 35 as obsolete, the Conference Committee had concluded in 1995 that it needed to be revised. Chile was one of the first countries that had privatized its pension system and many countries, particularly in South America, had followed its example. The attempt to prevent the development of private pension systems could never be successful. It was absurd to require Chile to comply with Convention No. 35. Although the current pension system in Chile was in clear violation of the Convention, it was a contradiction in terms to request the Government to ensure the application of the Convention, particularly in the light of the ILO's own view that the Convention was obsolete.

The Worker members noted with surprise that the Government had provided information to the Committee on a law adopted in March 2008, which had entered into force in July 2008, and which made important changes to the pension system, particularly since the Committee of Experts did not appear to have been informed of its adoption. The case was important because it not only failed to comply with ILO constitutional procedures, but also for substantive reasons, namely the pension policy adopted against the background of economic and financial crisis. Since the establishment of a new pension system which was fundamentally contrary to the Convention, the Chilean trade unions had been appealing to the ILO, without any reaction from the Government. They had therefore made a representation under article 24 of the ILO Constitution, in respect of which the Governing Body had adopted a report in March 2000 containing three recommendations. First, the new pension system should be administered by non-profit-making institutions, which excluded banks and insurance companies, which imposed phenomenal fees that could amount to one-third of the contributions paid. Second, insured persons should participate in the management of the system, which was not the case in Chile. Finally, employers should also contribute, alongside the workers, to the financing of pensions, which was not the case as it was a fully funded system. The Chilean Government had never adopted any of these recommendations. In the wake of the economic and financial crisis, and the failure in private pension fund systems, the Government had needed to reform the system, among other measures through the establishment of a basic social pension for persons of 65 years of age and above who did not receive or no longer received the social minimum income. The reform had two main shortcomings: the new basic social pension did little to make up for the vertiginous fall in private pensions, which had often fallen below the minimum level. It was a cruel lesson for those countries that had adopted or envisaged adopting the "Chilean model" based on financial investments in banks and insurance companies, as they risked facing the same problems: old-age pensioners having no guarantees as to the amount of their pension and the State being obliged to establish a new pension system. The failure of the Chilean model gave out a strong message to global leaders and institutions that stable pension systems had to form part of the policies adopted to combat the crisis. The second shortcoming was that the Government had not seized the opportunity of the adoption of the new law and the changes in the financial situation to give effect to the recommendations of the Governing Body. Insured persons were not always associated with, let alone informed of, the manner in which their pensions were administered. Their administration was still for profit, as the new Act only abolished the set fees of financial administrators. Employers were still not contributing to the financing of pensions. The only change was that invalidity and survivors' insurance would no longer be managed by private funds, but would be the responsibility of employers. The current system was one in which employers could deduct 20 per cent of the wages of salaried workers for social contributions, without any supervision of the actual payment of these contributions to social security funds, and without employers being liable to sanctions. For 30 years, that had been the situation of 80,000 teachers, entailing repercussions on their social rights and pensions. After so many years, the non-payment of these social contributions had resulted in a considerable debt. The Government had never wished to give effect to the Governing Body's recommendations in the case of the representation made by the College of Teachers of Chile. The Government had nevertheless taken some initiatives to examine the question of the arrears and very tangible proposals were under discussion with the teachers. The new 2008 Act should also make it possible to make up the gaping hole of unpaid contributions by establishing adequate financial penalties. It was regrettable that the Government had not supplied information earlier on the measures taken on this issue.

The Worker member of Chile acknowledged the efforts made by democratic governments to improve the social security system, and particularly for the coverage of the most vulnerable categories of society. The reform initiated by President Bachelet was intended to provide assistance pensions to those who had not been able to contribute throughout their working lives, and to those whose accumulated funds were insufficient to attain the minimum pension level. He emphasized that this reform strengthened solidarity measures and established a basic pension of approximately US$150 for the 60 per cent of the population that suffered from the greatest poverty and a solidarity supplement for those on lower pensions. The whole of the reform was being implemented through the taxes paid by the people of Chile.

While recognizing these efforts, he emphasized that workers continued to hope, as indicated by the Committee of Experts in its last report, that the Government would give effect to the recommendations made in 2000 and 2007 in the reports on the representations adopted by the Governing Body concerning failure to comply with social security Conventions. These recommendations urged the Government to reform the system of the management of private pension funds, take measures to resolve the problem of arrears in the payment of the further training allowance and solve the delay in the payment of the so-called "historic debt" relating to the wages of teachers which undermined their social security entitlements.

Structural problems remained in the management of private pension funds, which could be summarized under eight headings:

(1) The ILO had recommended that the pension system should be managed by non-profit making institutions. Nevertheless, pension fund administrators (AFPs) continued to be private enterprises that were highly profitable for their administrators, as one in three pesos paid in contributions were for their benefit. They were managed by an exclusive club of directors for whom the selection criterion was not known, nor was their income. The AFPs exercised great political and economic influence in the country, such that they had decided to invest in only 60 enterprises the owners of which were aligned with their economic and political tendencies.

(2) The ILO had indicated to the Government that the representatives of insured workers needed to be able to participate in the administration of the system. Nevertheless, workers did not participate in any way in decisions on the management of their money (investment, management and control).

(3) The ILO had also urged the Government that employers should provide funds to the pension system. No effect had been given to this recommendation, as workers paid 100 per cent of the contributions to their individual accounts, paid on a monthly basis. Employers did not make contributions to these funds.

(4) With regard to coverage, around 40 per cent of the population was outside the system, which placed a very heavy burden on the State. Statistics showed that only 11 per cent of workers paid contributions regularly.

(5) The contributions of over 50 per cent of workers did not guarantee a minimum pension.

(6) The pension system was based on the income that could be obtained from financial markets. However, this basis for the sustainability of the system had failed to prove its worth. Over the course of the last century, global financial markets had mainly operated at a loss and rarely exceeded inflation. This situation had been aggravated by the current global financial crisis.

The capital accumulation and income on workers' funds had made losses ranging between 30 and 40 per cent of the accumulated assets which, in terms of contribution years, amounted to between seven and 14 years on average. Nobody accepted responsibility for this situation, with the Government claiming that it was inhibited by the law and the enterprises administering the funds claiming that it was the fault of the markets. In practical terms, this meant that many workers had not been able to take retirement, and others would not be able to do so because their funds were inadequate.

(7) The situation was deteriorating because the system was compulsory and there was no freedom to opt for other systems, which meant that workers' contributions were captive.

(8) This system, which was unique in the world, allowed the employer to deduct the contribution, declare it and fail to deposit it in the worker's individual account, based on the ill-termed "declaration without payment".

He reiterated the firm belief of the trade union movement that it was necessary to make progress in the achievement of the fundamental principles of social security, namely a democratic system, centralized contributions, pluralism and competence in relation to investments, solidarity between the generations, financial sustainability, the strict prohibition of the investment of assets in risky shares, a tripartite system of control and supervision with the participation of the users, a public guarantee, contributions by employers, which were not currently paid, and universality. These principles ensured that the system was sustainable over time and involved the important element of solidarity. Social protection was inseparable from social justice and decent work.

He called on the Conference Committee to urge the Government to give effect to the observations made in the reports of 2000 and 2007 in relation to measures to safeguard the rights of workers in the pension system, and the payment of the historic debt of teachers. He emphasized that if this was not done it would be necessary to make a new representation against the Government for failure to comply with ILO Conventions before the next session of the Conference in 2010. He also called on the Conference Committee to urge the Government to undertake a structural reform of the private pension system based on the fundamental principles that it described and for the State to fulfil its central role in the system by securing the broadest and decisive participation of the social partners. The ILO should provide technical assistance to the social partners and the Government for that purpose.

The Employer member of Chile indicated that the crisis was also affecting pay-as-you-go systems. In fact, among the countries having adopted such a system, 57 countries had increased contribution rates, 18 had raised the retirement age and 28 had modified the systems for calculating pensions, for example by decreasing the replacement rate and increasing the number of years required for retirement.

Concerning the sustainability of the pay-as-you-go system, the percentage of workers over 60 years of age throughout the world had been 10.7 per cent of the population in 2007 and would reach 22 per cent in 2050. The figures for Latin America and the Caribbean were currently 9.1 per cent and would reach 24.3 per cent in 2050, compared with 21.1 per cent in Europe, rising to 34.5 per cent in 2050. In this demographic framework, it was not feasible to maintain a system in which active workers paid for the pensions of passive members of society. For this reason, a group of 25 countries had already replaced their pay-as-you-go systems by fully funded systems for practical reasons rather than on ideological grounds as it was often claimed. Pay-as-you-go systems were not viable in view of the inversion of the demographic pyramid. It was claimed that the social insurance system was bankrupt, but those who said so did not know the basics. Pension systems were called upon to make investments over 30 to 40 years and their financial performance therefore had to be analysed over this period, and not only over one, two or three years. Investments were valued on a daily basis and were accordingly subject to certain market variations, although in the long term they had always achieved high levels of return. For this reason, a loss in value did not actually mean a loss at the time when recovery started. In the case of Chile, the funds which fell the most, the most aggressive investments in variable rates, lost 28 per cent, but over the course of the present year had already recovered 20 per cent, which demonstrated the need for long-term analysis, particularly when it was born in mind that this was not the first crisis and others had been overcome. It was indisputable that a private system based on full funding was affected by the economic crisis. Nevertheless, even the so-called defined benefit or pay-as-you-go systems were affected by the crisis.

The following question therefore needed to be raised: were the parametric changes made to pay-as-you-go systems throughout the world an expression of a very strong effect of the economic crisis on them and did they take into account the enormous loss for those who had paid their contributions? For example, the most common parametric changes included increases in contribution rates (between 1995 and 2005 a total of 57 countries had increased contribution rates in their pay-as-you-go systems) and raising the retirement age (which had been done by 18 countries between 1995 and 2005). Was this not the proof of a loss? There were also other parametric adjustments to the formula for calculating benefits: a decrease in the replacement rate, an increase in the minimum number of years of contribution for entitlement to a pension, a decrease in the percentage return on pensions, the adjustment of the number of years taken into account to calculate the reference wage and changes in the systems for the indexation of pensions to inflation (28 countries had made adjustments of this type between 1995 and 2005). Could a system be classified as a defined and certain benefit system when those who had paid contributions to take retirement at the age of 60 realized that they had to pay for another five years, or when those who had contributed to achieve a replacement rate of 70 per cent saw it lowered to 50 per cent? The economic crisis also affected defined benefit systems, but more strongly. With regard to investments, the Worker member had suggested that in certain cases investments were enterprise tools over which a certain influence was exercised. In the case of Chile, over 40 per cent of investments in pension funds were placed in external products, and there could be no influence over the North American treasury bonds in which they were invested, nor in the shares of major global countries. The selection of investments was solely guided by two criteria: better performance and greater security. All the products in which pension funds were invested were set out in a list authorized by the Act and the AFPs. With reference to certain comments on the functioning of the Chilean system, the Government representative had indicated that the President of the Republic had established a committee of experts to analyse the insurance system which had reached a number of conclusions, including: (1) that the funded individual pension system had functioned adequately for 26 years; (2) that it would pay pensions at a similar rate to the wages of all workers who had made regular contributions; (3) that there had never been fraud or bad management of the funds; and (4) that they had made an extraordinary contribution to the economic development of the country. He therefore warned against entering into ideology, and emphasized that it was necessary to find a solution to the pension problem. In view of the demographic changes, the solutions offered by pay-as-you-go and defined benefit systems were not appropriate, as fully funded systems responded much better. With reference to the impact that the economic crisis could have on them, this was lower than the impact on those who had been promised defined benefits when the latter benefits could not be provided for reasons related to the economic situation of the State.

The Worker member of France said that the Committee of Experts had considered that the Government had not given effect to the recommendations that the Governing Body had adopted since 2000 calling for non-profit-making organizations to administer the social insurance system of 1980, participation by the representatives of insured persons in the management of the system and the payment by employers of contributions to the financing of pensions. Almost no progress had been made since then. Nor did the Government's report provide further information on the implementation of the recommendations made by the Governing Body in 2007 in the context of the representation made by the College of Teachers of Chile AG under article 24 of the ILO Constitution, despite the enormous historical debt that had been accumulated, which had been qualified as a political demand by the Government. It should also be emphasized that the shelving of Conventions Nos 35 and 37 by the Governing Body implied that detailed reports were no longer requested on a regular basis, while maintaining the right to invoke their provisions under articles 24 and 26 of the Constitution and to send comments to the Committee of Experts in the context of the regular supervisory system.

The pension systems of which Chile had been the precursor were simply individual savings accounts, with no contributions from employers and without insured persons having any say in their management, which was contrary to the provisions of the Convention. The crisis had caused a major depreciation in the acquired rights and it was now necessary to bring an end to a system that only benefited financial capital, rather than attempting to rescue it. It was urgent to make an in-depth reform of systems that provided no long-term guarantees and were a cause of social exclusion, particularly for elderly workers who had often had precarious jobs that were badly paid. The democratic Government needed to take into account the full scope of the problem, give effect to the recommendations of the supervisory bodies and adopt a pension system that was based on solidarity between generations, without being subject to the fluctuations of financial speculation and disproportionate fees, which currently amount to one-third of the amounts deposited. The minimal pension assistance for salaried workers who suffered from great discrimination was only a first step; although charity would never replace solidarity. It was therefore important for the Government to provide a detailed report on the initiative begun in the Senate at the end of 2008 with a view to finding solutions to the financial crisis.

In conclusion, he indicated that the system whereby contributions were deducted from wages but were not actually paid was inadmissible, and he considered the Government's succinct explanations in this regard to be confusing and largely unconvincing.

The Government representative of Chile indicated that her Government was not convinced that it was too early to evaluate the social insurance reform. She added that this reform was part of a process that was receiving ILO technical assistance.

She apologized for not having provided all the information requested on the implementation of the reform and indicated that much of the information was available on the website of the Ministries of Finance, Labour and Social Insurance, as well as the Parliament. Her Government had not yet submitted the information about the reform to the Office because the deadline for submitting the corresponding report had not yet expired.

The Worker members noted the Government's initiatives and projects to take action, at least partially, on matters that had long remained pending. The Government should therefore provide in time full information on the development of both public and private pension schemes, explaining when and how it intended to implement the recommendations of the Governing Body, and specifying the manner in which it intended to preserve pensions based on shaky foundations, and providing detailed information on the outcome of current discussions on the "historical debt" in the case of teachers. It was to be welcomed that the Government was willing to provide information, which should be submitted by the next session of the Committee of Experts at the latest.

Finally, the Worker members emphasized that Convention No. 35 remained in force for countries that had ratified it and that workers' and employers' organizations which wished to do so still had the right to make comments on their application and have recourse to the procedures under articles 24 and 26 of the Constitution.

The Employer members thanked the Government representative for the information provided and endorsed the statement made by the Employer member of Chile. They had taken note in particular of the indications provided by the Worker member of France, which overlapped considerably with their own statement. They recalled that the ratification of shelved Conventions was no longer encouraged and their publication in Office documents, studies and research papers was to be discontinued. Shelving meant that detailed reports on the application of the respective Conventions were no longer requested. However, it left intact the right to invoke the provisions relating to representations and complaints under articles 24 and 36 of the ILO Constitution. It also allowed employers' and workers' organizations to make comments in accordance with the regular supervisory procedures, and the Committee of Experts to review those comments and to request, where appropriate, detailed reports under article 22 of the Constitution. He pointed out that shelving had no impact on the status of these Conventions in the legal systems of the member States that had ratified them. Although the Conference Committee could discuss cases of the application of shelved Conventions, the action available to it was limited. They therefore called on the Government to provide a detailed report to be examined at the next session of the Committee of Experts and to make every effort to resolve the situation.

Conclusions

The Committee took note of the statement of the Government representative and of the discussion that took place thereafter. The Committee observed that the discussion of this case manifested concern over the viability of the private pension scheme established by Decree Law No. 3.500 of 1980 in conditions of the current financial and economic crisis, as well as preoccupation with the fact that for many years the Government has been apparently ignoring the recommendations for reforming the scheme on the principles set out by the Governing Body, in 2000, in the report of the Committee to examine the representation of the Chilean unions of employees of pension fund administrators (AFPs) under article 24 of the ILO Constitution. Following-up on the Governing Body recommendations, the Committee of Experts observed that the Chilean pension scheme based on the capitalization of individual savings managed by private pension funds (AFPs) was organized in disregard of the principles of solidarity, risk-sharing and collective financing, which formed the essence of social security, combined with the principles of transparent, accountable and democratic management of pension scheme by non-profit-making organizations with the participation of the representatives of the insured persons. The Committee of Experts pointed out in its General Report of this year that these principles underpinned all ILO social security standards and technical assistance and offered the best guarantees of financial viability and sustainable development of social security; neglecting them, on the contrary, exposed members of private schemes to greater financial risks while removing state guarantees.

The Committee was glad to know, from the oral intervention of the Government's representative, that in the last few years the Government has been closely working with the technical department of the ILO on reforming the Chilean pension system on these principles, which has finally led to the establishment in July 2008 of a basic universal public solidarity pension by Law No. 20.255 on pension reform. The Government representative stated that in 2012 there would be close to 1,200,000 people of those who would be able to receive the new minimum solidarity pension or a complement to the private pension, which served as a safety net for those who failed to get a sufficient private or any pension to live on.

In view of the importance of the changes brought by Law No. 20.255 to the Chilean pension system, the Committee invited the Government to furnish a detailed report on the application of the Convention for consideration by the Committee of Experts at its next session in November-December 2009. However, while welcoming the establishment of the public solidarity tier in the Chilean pension system, the Committee could not but observe that no major changes were brought to the private pension scheme established by Decree Law No. 3.500 of 1980. Taking into account the gravity of the situation, the Committee urged the Government to continue reforming the system along the lines of the recommendations made by the Governing Body in 2000 and to include in its report information on the measures taken to protect the private pension scheme from the financial crisis.

The Committee further noted the detailed oral explanations given by the Government representative concerning measures taken to give effect to the recommendations of the committee set up to examine the representation made by the College of Teachers of Chile AG under article 24 of the Constitution. The Government representative also responded to the observations made by the College of Teachers of Chile AG concerning repayment of the so-called "historic debt" of social security resulting from the non-payment of the full wages in conformity with Decree Law No. 3.551 of 1981 to nearly 80,000 teachers, as well as to observations made by the Circle of Retired Police Officers alleging the loss of acquired rights related to old-age pension by penitentiary staff. The Committee recalled that some of these questions dated back a number of years without, it would seem, effective solutions being found by the Government. While expressing concern that no information had been previously supplied on these issues in the Government's reports, the Committee understood, from the intervention of the Government's representative, that the Government intended now to transmit detailed legal and technical information to the secretariat. It therefore hoped that this information would be made available for examination by the Committee of Experts together with the detailed report of the Government.

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A Government representative emphasized the special concern of her Government to faithfully promote the principles, Conventions and Recommendations of the ILO through the adoption of the legislative and administrative measures that were relevant and possible to comply with its commitments.

With regard to the Convention, she described the characteristics of the Chilean pensions system established in 1980 by Legislative Decree No. 3500. The Chilean pensions system had a long tradition with its origins in the social legislation adopted in 1924. From that time, a gradual process had commenced of extending the coverage of the system to all sectors, with the result that it was possible to state that the Chilean legislation covered all dependent workers and a significant proportion of the self-employed. In 1980, a substantial reform had been commenced to the pensions system, consisting of the establishment of an insurance scheme based on individual capital accumulation, with emphasis on the participation of private entities in its management. However, the binding nature of the legislation had been maintained, with compulsory affiliation, financed through a system based on contributions which had to be paid by insured persons, as well as the system of benefits, all of which led to the unavoidable conclusion that in legal terms this was a public law system. Furthermore, the private entities which were permitted by law to participate in the management of these schemes were subject to rigorous supervision obliging them to abide by the instructions and recommendations of a technical service in the central administration, known as the AFP Superintendency, which had the responsibility of safeguarding the public interest. In turn, this service was subject to parliamentary scrutiny.

The State, as the guarantor of the right to social security and, in practical terms, of pensions schemes, was responsible for ensuring that everyone had equal access to benefits, including the right to the minimum pension. This explicit mandate was set out in article 19(18) of the Political Constitution of the Republic of Chile.

The private entities entrusted with the management of the system were profit-making and had to take the form of limited liability companies, in accordance with the requirements of the law. As a consequence, anyone who fulfilled the necessary requirements, including workers concerned with the development of the system, could be involved in their establishment, as had occurred in practice, as reported by the Government in its reports to the ILO. She recalled that the operations of such entities were subject to the public regulations and controls set out in the legislation establishing the system. The supervision of pension fund administrators was carried out by the AFP Superintendency which, with the necessary autonomy, was under the authority of the Sub-Secretariat of Social Insurance.

She added that, with regard to rights that were currently being acquired by workers insured under the former social insurance systems, the law established a transitional scheme allowing them to continue to be covered by the above systems with the maintenance of their rights, even though the financial assets of the social security system no longer existed. This made it necessary for the Treasury to make substantial contributions to finance the pensions of these workers. A public body existed to manage this scheme, namely the Insurance Standardization Institute, which acted as the legal coordinator of the former social insurance funds.

With regard to the financing of the pension benefits provided for in Legislative Decree No. 3500 of 1980, she indicated that contributions to the scheme were paid by workers, although some employers were not dispensed from also making contributions. This was the case for the scheme for arduous categories of work, for which the law required a joint contribution from both employers and workers equivalent to 2 per cent of taxable remuneration to the individual capital account of each worker. Moreover, workers and employers could conclude individual or collective agreements providing that the latter would make contributions, known as agreed deposits, to the individual capital account of the insured person with a view to increasing the balance so as to improve the pension.

In relation to the employer's contributions referred to above, it should be noted that in Chile the financing of the social security scheme for employment accidents and occupational diseases was based on contributions paid exclusively by employers. The State had not disregarded its obligation to contribute to the financing of contributory schemes, and could not do so in view of the clear provisions of the Political Constitution. As a result, the Treasury was obliged to finance fully the minimum pensions provided by both the reformed system and the transitional scheme referred to earlier.

She added, in general terms, that the management and administration of the schemes and the participation of those concerned and insured persons in the various schemes which made up the pensions system, as well as the most appropriate methods of financing benefits, were currently subjects which were giving rise to intense debate in various circles, which had resulted in the series of reforms of various types undertaken in many countries throughout the world. This new situation relating to social security institutions was recognized by the ILO which, with a clear vision of the future, had called for a very interesting debate in the Social Security Committee of this Conference.

Her Government, in collaboration with all the social sectors, and particularly workers and employers, as part of a process of setting out points of view either directly, or through Parliament, had adopted measures designed to improve the individual capital accumulation scheme, especially in the areas of profitability, transparency, costs and coverage, as well as the information required by insured persons concerning the options available to them. She said that the education and culture of citizens in matters relating to social insurance had become an objective of the public authorities, which had given rise to interest in all sectors. She expressed the opinion that, in view of the difficulties that were arising concerning the coverage of the increasingly extensive categories of informal sector workers, it was necessary to raise awareness of the importance of affiliation to the various social protection schemes, as well as of continuing the payment of contributions. In addition, other policies had been adopted to create incentives to make affiliation attractive. She indicated that Chile had recently enacted legislation establishing an unemployment insurance scheme which, among other objectives, was intended to provide a replacement income for insured workers, not only in the event of the loss of their jobs for reasons which were not attributable to them, but also in a series of other contingencies.

With regard to the payment of contributions by employers, she expressed the opinion that in an increasingly globalized world, characterized by a large degree of informality in labour relations, it was necessary to adjust rules for the collection of contributions. She stated that the efforts made by the Government in this respect were recognized by Chilean workers and employers. With a view to adequately safeguarding the rights of insured persons, including those in pension schemes, and in an effort to comply with its international commitments, policies and standards along the lines indicated had recently been adopted. Labour inspectorates had recently intensified inspection activities concerning compliance with the rules relating to the deduction, collection and payment of contributions by employers. Standards had also come into force preventing employers from terminating the employment contracts of their employees if they had failed to pay contributions to the corresponding insurance entity. The so-called "Bustos" Act, named after the late distinguished trade union leader who had urged its adoption, did not permit the termination of the employment relationship of workers whose insurance situation was incomplete due to the absence of periods of contributions that the employer should have paid at the time. With a view to facilitating the collection of unpaid contributions, she indicated that an Act had recently been adopted allowing employers who were in arrears with their compliance with this obligation to conclude agreements with the entities entrusted with the management of social security to reprogramme the payment of arrears in such a manner that the level and updated value of the contributions owed was not affected. Finally, in relation to the effective compliance of employers with contribution requirements, she indicated that a few months ago a forum had been established for the reform of labour and social insurance law composed of specialists of all the sectors involved. The intended objective was to present a project for the review of the labour process in Chile, with special emphasis on the payment of contributions which were in arrears. In the medium term, it was hoped to undertake a far-reaching reform of the legislation relating to labour procedures with a view to the establishment of a specialized body specifically covering the payment of insurance contributions.

She reaffirmed that the measures announced would have to be accompanied by proposals to promote the inclusion and effective payment of workers' contributions in the so-called informal sector of the economy. The Government, in consultation with the social partners concerned, was currently developing proposals to include in social protection various categories of occasional workers, including women occasional workers who were heads of households.

On the subject of the level of pensions, concerning which information had been provided by a number of organizations of public officials and workers connected with the public sector, who had indicated that they had opted to join the pensions system established by Legislative Decree No. 3500, the level of the pension had turned out to be lower than the guaranteed minimum in some cases. She said that the transitional scheme established to maintain the rights that were being acquired by workers affiliated to the former pensions insurance schemes also envisaged the possibility of these workers opting to join the new individual capital account system. In such cases, they would be entitled to a tax credit known as a recognition bond, allowing them to increase the amount of their individual capital account in relation to their membership of the former system. The law allowed those affiliated to the new system, and who had not been entitled to a recognition bond, to opt once again to rejoin the former system, in which the rights that they were building up were maintained.

Finally, it should be noted that the State guaranteed for all workers affiliated to any pension system a guaranteed minimum pension in cases in which, under the specific legislation, the resulting level of the pension was lower than the minimum level, for which the legislation required the completion of a period of contributions in accordance with the relevant rules.

She reaffirmed that her country had constantly taken care to comply with the noble principles and standards adopted by the ILO with a view to facilitating the harmonious and successful development of labour relations. In this respect, and with regard to the need to harmonize the provisions adopted by the ILO and those approved and ratified by Chile in the field of social security, she emphasized the special concern of the democratic governments as of 1990 to carry out the necessary reforms to improve the industrial relations system. The Sub-Secretariat of Social Insurance had required the technical bodies which lay within its competence to give priority to carrying out the necessary studies identifying the measures which would need to be adopted to progress in the process of ratifying the Invalidity, Old-Age and Survivors' Benefits Convention, 1967 (No. 128). The studies carried out up to now showed that in general there were no inconsistencies or incompatibilities between domestic legislation in this field and the provisions of the Convention. In this way, once a number of doubts of a technical nature had been resolved, it was possible that the Government might decide in the near future to take the necessary measures to finalize the instrument of ratification of the Convention, which had already been submitted by Chile and approved by its legislative authority. The finalization of the instrument of ratification would result, in accordance with the provisions of Convention No. 128, in the denunciation of the older Conventions Nos. 35 to 38 which, because of their age, were not adapted to the needs of today, nor to the policies that modern states had to adopt to protect their workers, including the important changes imposed by the economic, social and cultural development of countries throughout the world.

In conclusion, she emphasized that her country was making every effort to find solutions to harmonize Chilean internal law and policy with the international standards and undertakings which it had contracted. She hoped that, as had hitherto been the case, this would be achieved with the valuable technical assistance of the ILO.

The Worker members recalled that this case had been examined by the Committee the previous year and that they had mentioned it in their statement presenting the list of individual cases. At the time, they had indicated that they would come back to the difficulties concerning the application of the Convention by Chile if real progress had not been achieved in the meantime. They also recalled that the case had been examined by the Conference Committee on the last occasion in 1995 and that it had been once again discussed by the Governing Body in March 2000 when examining a representation submitted under article 24 of the ILO Constitution.

The present case concerned an important aspect of social security, namely old-age insurance. The Worker members attached great importance to ILO Conventions on social security and believed that they played an essential role in combating poverty. Old-age insurance was the indispensable safety net which ensured a dignified old age to those who had worked for the whole of their active lives and had earned the right to rest.

They said that the case of Chile was of particular interest since it raised the question of the difficulties which often arose when certain branches of social security were privatized. Chile had made the transition to a private old-age insurance system, which had created many types of problems.

The first point raised by the Committee of Experts in its observation concerned the financing and management of old-age insurance. For many years, the Committee of Experts had been requesting the Government to amend its 1980 legislation, which did not provide for the obligation for employers to contribute to the financial resources of the insurance scheme, in accordance with Article 9, paragraph 1, of the Convention. Moreover, the legislation did not provide for the contribution of the public authorities to the financial resources or benefits of insurance schemes, in accordance with Article 9, paragraph 4, of the Convention.

The second point raised by the Committee of Experts concerned the absence of participation by insured persons in the management of insurance institutions. Article 10, paragraph 4, of the Convention provided that "representatives of the insured persons shall participate in the management of insurance institutions under conditions to be determined by national laws or regulations (...)". Although there was a broad margin for manoeuvre with regard to the conditions under which insured persons would participate, the Convention left no room for doubt concerning the principle of such participation. The fact that, under the national law that was in force, it was "possible" for insured persons to participate was not sufficient to ensure compliance with the Convention.

The third point raised by the Committee of Experts on which the Worker members commented concerned the situation of public officials. According to the information provided by several organizations of workers in the public service, the level of the pensions paid to public officials had fallen steeply. For this reason, they called upon the Government to take effective measures to ensure that the rights set out in the Convention were ensured for all workers without distinction whatsoever.

They noted that, as in the discussion of the case by the Committee in 1995, the Government had once again expressed its good will. It had stated that it wished to maintain a constructive dialogue and had undertaken to provide additional information. However, they noted that since the establishment of the new pensions system in Chile no significant progress had been noted in relation to the discrepancies identified by the Committee of Experts for many years. These consisted of serious violations which could have dramatic consequences on the situation of retired workers. They therefore believed that it was high time that the Government took measures rapidly to bring its old-age insurance system into conformity with the Convention. They drew the Government's attention to the fact that it could always have recourse to the technical assistance of the ILO.

The Employer members indicated that Article 10 of the Convention was central to the comments of the Committee of Experts. This case had been the subject of the Committee of Experts' comments since 1983 and had been discussed in this Committee since 1995, following the introduction of a new old-age pension system in 1980 by Legislative Decree No. 3500. Under the terms of the Convention, the pension system had to be administered by non-profit-making institutions with the participation of representatives of the persons insured. These conditions were not met in the new pension system. However, the Government member had indicated that the new system was more successful than the former one since the latter was in less and less of a position to provide benefits. While the new system was in clear breach of the Convention, the only solution for Chile was to denounce the Convention in order to maintain the new system which was functioning successfully. In this regard, the Employer members recalled the decision adopted by the Governing Body of the ILO inviting parties to Convention No. 35 to denounce this Convention, since it had been considered to be obsolete. At the same time, the Governing Body had invited the member States concerned to contemplate ratifying the Invalidity, Old-Age and Survivors' Benefits Convention, 1967 (No. 128). However, regarding the administration and funding of pensions, Convention No. 128 did not differ from Convention No. 35. The Employer members considered this whole discussion to be somewhat strange. While they agreed with the Governing Body decision to classify Convention No. 35 as obsolete, they recalled that this Committee had already concluded in 1995 that this Convention needed to be revised. Chile was one of the first countries that had privatized its pension system and many countries, particularly in South America, had followed its example. The attempt to prevent the development of private pension systems could never be successful. It was absurd to require Chile to observe Convention No. 35. Although the new pension system in Chile was a clear violation of the Convention, the Employer members considered it to be a contradiction in terms to request the Chilean Government to ensure the application of this Convention. This was especially so in the light of the ILO's own view that the Convention was obsolete. In conclusion, the Employer members would not support such a contradiction in terms in the Committee's conclusions.

The Worker member of Chile indicated that the evaluation of the pension scheme was negative for two reasons. Firstly, because the system of individual capitalization was imposed on terms unfavourable to the workers and, secondly, because the ensuing profits went to company owners and the losses to the State. He proposed that a mixed scheme should be introduced, and rejected the compulsory imposition of the individual capitalization scheme. He expressed his concern that it would lead to a technical approach far removed from the social type of scheme and would adversely affect workers with the lowest incomes. Decisions should be taken in consultation with the people and not against the people. He agreed with the Government member of his country that a debate should be opened on the subject to ensure the existence of social security in Chile.

The Employer member of Chile endorsed the comments by the Employers' spokesperson. He emphasized that in 1995, the Committee had stated that this Convention should be revised. For the same reason, the corresponding law was revised in Chile, and later by Peru, Argentina and Mexico. He indicated that in the 1960s, the ratio of active workers to pensioners had been ten to one and in the 1980s two to one. Consequently, the former pension scheme had not been viable. For that reason, an individual capitalization scheme had been chosen. He said that after 20 years, the results were clearly positive. He added that everyone was entitled to their own opinions, but not their own facts. In that respect he said that: (a) the return on the scheme, i.e. on individual accounts, had been 11 per cent from the 1980s up to the present; and (b) in economic terms, the scheme had contributed to the economic development of the country, since workers' savings, which amounted to $38 billion invested in securities issued by private companies, represented a significant percentage of Chile's GDP. With respect to the statement by the Worker member of Chile, in which he demanded state intervention in the scheme, the speaker said that such intervention already existed since the State guaranteed minimum pensions, for example, in the case of redundancies. The speaker maintained that it was a successful system which combined economic and social solutions in support of workers' social welfare. While it was true that the scheme had been created under an authoritarian government, it was subsequently endorsed by democratic governments. Finally, he emphasized that in the case of a successful scheme it was not reasonable to ask to turn back the clock to the detriment of the workers.

The Employer member of Colombia, speaking on behalf of Latin American employers, highlighted the importance of the scheme in Chile which had served as a model for other countries in the region some of which, like Mexico, had adopted them. The personal savings scheme had been established in his country in 1993, with a guaranteed minimum return to workers of 5 per cent. The return was currently over 10 per cent which showed that the experiment of combining a personal savings scheme with an average premium or contributory scheme was to the advantage of workers. In Colombia, workers could choose their scheme and change every three years from one scheme to another as they wished. He pointed out that over half of them had opted for the personal savings scheme, which was a clear evidence of its success.

The Worker members stated that they noted the reasoning of the Employer members without understanding its logic. The Governing Body had in fact requested the States parties to Convention No. 35 to consider ratifying Convention No. 128 and, at the same time, denouncing the former. The aim was to ensure that the denunciation of Convention No. 35 was not made before the ratification of Convention No. 128. In spite of the argument put forward by the Employer members, it was worth highlighting that so long as Convention No. 35 remained in force, it had to be fully applied in practice. The Worker members recalled that the Convention did not prohibit social security benefits under private schemes. However, the Convention specified the conditions that needed to be met for ensuring benefits under private or public schemes.

The Employer members noted that that the Worker members disagreed with their views. It was true that the Governing Body did indicate that the member States concerned ratify Convention No. 128 before denouncing Convention No. 35. However, the Governing Body had also stated that Convention No. 35 was obsolete. There was no doubt that the pension system introduced in Chile in 1980 was not in conformity with Convention No. 35. The consequence of this state of affairs was that the Committee could take note of this but could not urge a member State to comply with an obsolete Convention. This contradiction in terms should not be contained in the Committee's conclusions which should only reflect the points of consensus in this Committee.

The Committee took note of the detailed information presented by the Government member. The Committee recalled that the case had been examined in 1987, 1993 and 1995, and had been the subject of three representations. The Committee recalled the importance of the social security Conventions bearing in mind the significant role that they played in the battle against poverty. In that respect, old-age insurance played a fundamental role. As for the application of the principles of the Convention, the Committee of Experts had indicated that the private pension scheme established by Legislative Decree No. 3500 of 1980 did not meet the requirements of Convention No. 35 in the following ways: (a) the scheme did not provide for any direct contribution by employers to the financial resources of insurance funds; (b) contributions by the Government to financial resources and benefits was of an ad hoc and, ultimately, exceptional nature; (c) the pension fund administrators (AFP) were private for profit-limited liability companies; and (d) with the exception of certain trade union AFPs, the insured persons did not participate in the management of the AFP. The Committee took note that the Government had responded positively to the invitation by the Committee of Experts that Chile should contemplate ratifying the Invalidity, Old-Age and Survivors' Benefits Convention, 1967 (No. 128) and denounce Convention No. 35. It noted with interest, in that respect, that the Government had adopted appropriate measures to complete the act of ratification of Convention No. 128 which had already been signed by Chile and approved by its legislative body. The Committee confirmed that the Governing Body had proposed the ratification of Convention No. 128 and the corresponding denunciation of Convention No. 35. The latter Convention, according to the Governing Body, had been closed to ratification. With respect to the application in practice of the Convention, the Committee took note in particular of the information provided by the Government in reply to the observations of various academic associations in the public sector concerning the level of pensions. The Committee hoped that the information concerned would be examined by the Committee of Experts at its next meeting. It noted that the Government intended to do all that was necessary with the support of the ILO to identify appropriate solutions.

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A Government representative recalled that the Committee of Experts had been making observations on Conventions Nos. 35, 36, 37 and 38, which were all adopted in 1933 and ratified by Chile in 1935. He dealt with each point of the observation.

Employers' contribution to the financial resources of the insurance scheme. The pension scheme introduced in 1980 was based on individual capitalization constituted by a compulsory contribution that the employer deducted each month from the worker's wages and a voluntary savings contribution by the worker. Legislative Decree No. 3501 provides in addition that the employers must increase the remuneration of the workers in proportion to the amount of the pension contribution. The net amount available to the worker was thus maintained and the change of legislation did not entail financial consequences. The employers' contribution to the resources of funds was constituted by the payment agreed upon individually or collectively, of the amount into the individual account so as to increase the necessary capital to finance early retirement pension or to increase the amount of the pension. This was an obligatory contribution under the law.

The pension fund was increased in 1994 by 2,600 million pesos (US$6,500,000); in 1993, by 2,500 million pesos (US$6 million), and in 1992 by 1,700 million pesos. This meant that over three years, from 1992 and 1994, employers contributed more than US$15 million. In addition to this, under section 15 of Law No. 16744 on social security against the risk of occupational accident or disease, a basic general contribution was to be paid by the employer, that is, 0.90 per cent, and an additional, variable employer contribution according to the activity and the risk of the firm, which is 3.4 per cent of the worker's remuneration. These obligatory and exclusive contributions of the employer were of a permanent nature.

Contribution of the public authorities to the financial resources of benefits of the insurance scheme. He emphasized that the State did actively participate in the new system. (a) The Chilean Constitution in article 19, section 18, laid down the right to social security as a constitutional guarantee. The administration of a branch of social security, i.e. pensions, was delegated by the State to private bodies called "Pension-Fund Administrations (AFPs)". The State kept a watchful eye through the Administrative Pension Fund Supervisory Board, which was a central state body. This supervision has a monitoring and standard-setting role: standard-setting because it gave instructions with respect to obligatory processes for all the institutions supervised, and monitoring with respect to verifying compliance with the legal obligations imposed on AFPs. (b) Legislative Decree No. 3500 of 1980 laid down the State's participation in the constitution of resources by means of the state guarantee. It guaranteed minimum old age, disability and survivors' pensions to the beneficiaries and over and above this, and financed a voucher system (bono de reconocimiento) for former payments made under the old pension fund system. The state guarantee, which took the form of so-called programmed retirement and temporary pensions, worked once the resources of the individual accounts were in fact depleted, and also in the case of the so-called "life pension", when its level was lower than the minimum state pension. This state pension was uniform for all workers, regardless of the pension scheme that they were covered by, and its amount was in fact adjusted regularly by the law. The law also established the state guarantee for the additional contribution (that is, for the contribution, for example, to disability pensions, survivors' pensions and life pensions). The amount of the state guarantee was the equivalent of 100 per cent of the shortfall to complete the payment of the benefits, with certain exceptions. For 1994, the State made a contribution equivalent to US$7,334,891 in state guarantees. The State further guaranteed cases of cessation of payment or declaration of bankruptcy of an AFP, or an insurance company being unable to fulfil its obligations as to the pensions. (c) The financial participation of the State in the issue of and payment of vouchers (bonos de reconocimiento) meant a commitment of future payments by the State of approximately US$15,232 million by the year 2037. From all the above explanations, it emerged that the financial participation of the State was not occasional or exceptional but direct, real, concrete, specific and calculable.

Administration of the insurance scheme. The AFPs could be created on the initiative of the workers or their organizations and the statutes could provide that any profits obtained must be used for the payment of other social benefits to the worker/shareholders themselves and to their families. The individual capitalization system established in 1980 entrusted the administration of the system to AFPs limited companies which had the right to remuneration in the form of commissions paid by the members in respect of the effective administration of the pension funds. The profit-making nature of the private administration of the pension systems has encouraged competition among the AFPs in offering better services to members, greater return on the investment of the pension funds that they administer, and lower costs for the membership in the form of lower commissions in order to attract contributions. The Government has made considerable progress towards greater transparency with regard to the information which must be provided to members concerning the return obtained by each pension fund and the commissions which each AFP charged so that the members were properly informed when they opted for the body which was to administer their pension savings. Competition between the various AFPs, far from harming the members, has encouraged efficiency in the system. Furthermore, trade unions were also legally entitled to establish AFPs under section 220 of the Labour Code. In fact, there were AFPs established by trade unions and workers' organizations in the banking sector and among teachers. The sectoral organizations of employers have also set up some AFPs in such sectors as commerce, construction, agriculture and bakery.

Participation of insured persons in the administration of insurance institutions. The pension system allowed the participation of members of the pension institution by the creation of AFPs on the initiative of the workers or their organizations and they could also establish in their statutes that the profits must be used to improve the benefits established by law. There was no mandatory machinery for members of AFPs to intervene in the administration and management directly of the pension fund that was administered, but such participation was not prohibited either. Legislative Decree No. 3500 did not envisage traditional machinery for the direct participation of members in pension fund administration and management, but established a different form which was the right of each worker to join the AFP of his or her own choice. While a minimum amount of social capital was initially required amounting to 20,000 development units, this quantity was reduced to 5,000.

The traditional pay-as-you-go system was totally underfunded and technically bankrupt and had serious administrative problems. It was for this reason, and with the sole objective of saving the pension funds of workers and enabling the workers to obtain decent pensions, that the Government created a pension system under private administration, with strong state supervision and contribution by means of the state guarantee of the minimum pension.

Finally, the speaker stressed that the Government did not wish to appear not to be complying with its obligations under the Conventions, especially in a period when it had ratified seven Conventions and was considering the early ratification of others. He wished to inform the Committee that the Government would initiate a process of consultations in the tripartite committee established in accordance with Convention No. 144 in order to adopt, with regard to Conventions Nos. 35, 36, 37 and 38, the necessary decisions to resolve the problems raised by the supervisory organs.

The Workers' members recalled the history of the case including a representation made under article 24 of the Constitution. They noted that there had been enormous sophistication in pension schemes since 1933. They noted on the first point, the statement of the Government representative, that employers did contribute, and wondered whether there was a confusion of terminology arising from a 1933 Convention as regards the contribution of employers by law. Secondly, regarding the contribution of public authorities, in many countries governments made provision in accordance with Article 9, paragraph 4, of the Convention in a form of guarantee. On the third point, concerning the administration by profit-making limited liability companies, if the profits were directed towards the people in the scheme in a different form, it could be argued whether or not these were non-profit-making organizations. As to the limited liability of companies, the important thing was that the Government was actually guaranteeing the pension provision.

They thought that if the Government were to denounce some Conventions then, it should be accompanied by the ratification of more modern Conventions. But if they were to continue with Convention No. 35, technical assistance of the ILO could help.

The Employers' members emphasized that, although they were technical in nature, the problems raised by the Committee of Experts were nevertheless elements of non-conformity with the provisions of the Convention. The initial compensation of wages did not amount to a permanent contribution of the employers to the formation of financial resources of the insurance scheme within the meaning of Article 9, paragraph 1, of the Convention. The financing of a state guarantee could not be included as financial participation of public authorities under Article 9, paragraph 4; under Chilean law, the administration of insurance could be dealt with by profit-making bodies, but this was in violation of Article 10, paragraph 1, of the Convention; and finally, even if the participation of representatives of insured persons provided for under Article 10, paragraph 4, was possible, it was not compulsory. At a time when it was determined that a certain number of governments were introducing similar systems, particularly in Latin America, it was appropriate to wonder whether each of the technical conditions must be respected in order to ensure conditions that were "at least equivalent" as provided for under Article 1 of the Convention. They expressed their view that the Convention needed a revision in view of the evolution during the last 60 years in the shared responsibilities between the State and the market mechanism.

The Government representative thought that the denunciation of the Convention and the ratification of some other Conventions was only one of the possibilities. He indicated however that the matter would be examined by a tripartite committee in accordance with Convention No. 144. He agreed with the Employers' members in saying that the ILO should consider adopting new standards taking into account the present situation. He emphasized that the US$25,000 million of the fund that they were administering was under strict supervision as to investment and could not be expropriated.

The Workers' member of Argentina noted that similar systems existed in certain other countries and thought that the investment in foreign countries in fact provided certain guarantees.

The Employers' member of Chile emphasized that a system such as the Chilean one, which had achieved in so few years of existence an accumulated fund of US$25,000 million, was one that not only demonstrated its success but also showed that it had many more possibilities to overcome whatever crisis arose.

Moreover, the successful experience of the Chilean social security system, the purpose of which had been achieved equally in other countries, to adapt their systems to the realities of the modern world, presented an excellent opportunity for the ILO to conform to the challenge established by the Director-General in his Report for 1994 to adapt the ILO to the new times and to the modern world. The possibility should be analysed to restudy the Convention on social security to make it respond better to the challenges of the world today in such a manner without losing its spirit.

The Workers' member of Guatemala expressed the deep concern of all workers in the region about this system since the Chilean model of social security system was spreading to other countries. This model, which should be regarded in the context of new liberal policies of structural adjustment and of the reduction of the State's functions, was threatening the fundamental principle of solidarity, which should be the basis of any social security system.

Another Government representative assured that the Government would provide the necessary legislation and information concerning the system to make further examination possible.

The Workers' members thought that the Government should be urged to conduct tripartite discussions on the matter and to make a report on it.

The Committee took note of the statement of the Government representative. The Committee also took note of the observations of the Committee of Experts that the new pension system, brought into force by the Government in 1980 was inconsistent with Convention No. 35 in that it did not legally mandate employers' contributions; that the State's financial participation did not strictly correspond to the contribution to the financial resources of the funds as envisaged; that the law did not preclude administration of the funds by non-profit-making institutions and that a compulsory mechanism for participation and management in the funds by the insured persons had not been legally established. While the Committee felt that the clarifications furnished by the Government representative were seemingly indicative of substantial compliance with the Convention, none the less, the technical comments made by the Committee of Experts could not be ignored. In this context, the Committee also felt that Convention No. 35 itself needed to be revised. In the circumstances of the case, the Committee advised the Government to further examine the recommendations of the Committee of Experts for the purpose of working out modalities of bringing their new pension system within the technical framework of the Convention. The Committee also advised the Government to hold tripartite consultations in this context and report the results thereof.

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A Government representative pointed out that this Convention recognized and regulated a former model of "Bismarckian" social security which was now obsolete. He stated that, in 1992, the Government had provided information which clearly showed that the pension scheme established in 1980 was part of a complete transformation of the social security system and fulfilled the principles accepted by the ILO. This transformation did not weaken but rather confirmed and, in fact, perfected the spirit and the objectives which were contained in Conventions Nos. 35, 36, 37 and 38 of 1933 which were now obsolete. He declared that, as requested by the Committee of Experts, a report would be sent for the period ending 30 June 1994 containing new and detailed information, demonstrating the Government's unfailing willingness to discuss and its desire to find a solution to the differences of opinion expressed concerning the application of the Convention, which it felt were purely formal, and, more importantly, the applicability with respect to the legal effect of the Convention. He referred to the ideas contained in the report of the Director-General which, in his opinion, constituted a factor of orientation in the analysis of the social security situation in each country. He referred to, as illustrations of these aspects, the indication in the Director-General's report that the development of social protection was an internal matter and that only limited assistance could be provided from the outside. What confirmed the experience demonstrating the evolution of social insurance to social security was the current direction of policy toward the formation of not only simple social insurance schemes but also integrated social security programmes, in which in a simultaneous or complimentary manner models of social security, social assistance, social services as well as other measures were applied to combat poverty. This also confirmed that to resort solely to technical means for social security was insufficient if macro-economic policies to obtain a balanced and independently sustained growth were not put into practice. Social security tended to become a basic principle of the modern State, like the principles of liberty and equality before the law. The entire policy of a government had, therefore, to be oriented towards the creation of conditions for a healthy economy and society. He stated that the primary objectives of a policy based on the principles of social security were to achieve: self-sustaining economic growth; a macroeconomic balance which permitted an increase in job offers and an improvement in the salaries and pensions of workers; and a lowering of monetary inflation. He emphasized that the policy which Chile was applying coincided with these modern orientations, in that it had established a social security programme which covered all generally acceptable social contingencies, by means of different institutional models which complemented each other, within which the State had assumed the greater financial burden through a general tax regime, taking care at the same time to formulate a macro-economic policy which, in practice, permitted a growth in product which in the past year amounted to 10 per cent of the internal product, an unemployment rate of 4.2 per cent, and a substantial decrease in monetary inflation.

Finally, he stated that, while the Convention had not been applied since 1980, it was the will of the Government to maintain a constructive dialogue and it would provide additional information in future reports, permitting the Committee of Experts to make a legal analysis, which would demonstrate that the present system did not prejudice the workers' interests, as had been the case with the previous legislation. This information should allow for an adequate interpretation of the standards in question. He expressed the hope that systematic criteria would be established so that this controversy, which was of a formal nature and did not raise any substantial questions concerning the application of the Convention, could be overcome. He expressed the hope that it would be recognized that urgent changes were needed to respond to these problems.

The Workers' members recalled that the important discrepancies between Legislative Decree No. 3500 of 1980, as amended by Act No. 18964 of 1990, and the Convention had been raised by the Committee of Experts and discussed by this Committee for a number of years and had also been the subject of the committee set up for the examination of the representation made by the National Trade Union Coordinating Council (CNS) of Chile. They pointed out the incompatibilities between the pension system in Chile and the Convention with respect to: the compulsory contribution of employers; the financial contributions of the public authorities; the participation of insured persons in the management of all insurance institutions; and the administration of insurance schemes by non-profit-making institutions. They noted that the Government was going to send a detailed report to the Office and that it was open to dialogue, but pointed out that the Government had not demonstrated its desire to change the system. Furthermore, they noted that the Government, convinced of the effectiveness and the objectivity of its system, wished to maintain it in its present state and thus firmly resisted the application of the international labour standards. The Workers' members emphasized that the criteria of efficiency and objectivity, the importance of which they recognized, were not incompatible with Convention No. 35 and the revised Conventions. They noted that, in this regard, the present system was not in conformity with the revised Social Security (Minimum Standards) Convention, 1952 (No. 102), nor with the Invalidity, Old-Age and Survivor's Benefits Convention, 1967 (No. 128), which were more recent instruments which had not been ratified by Chile. They further indicated that criticism and doubts had been expressed with respect to this system in the analysis published in the International Labour Review in 1992 as concerned the insufficiency of solidarity between the different generations and the different social categories, the benefits guaranteed and the future return of investments. The Workers' members noted that no progress had been made since the creation of the new system with respect to the issues of non-compliance of the Convention and requested the Government to reconsider its position in the light of the comments made by the Committee of Experts and the doubts expressed as to the efficiency and objectivity of the system.

The Employers' members recalled that this case had already been discussed in this Committee on numerous occasions and wondered why this technical question was so often addressed. They pointed out that the private old-age insurance scheme, which was the subject of the Committee of Experts' comments, was being established in other Latin American countries and noted that it might actually be a successful system. Regardless of its success, however, the scheme being discussed in this case was clearly not in compliance with the Convention. Even the Government had admitted that the Convention had not been applied in the country since the adoption of the new scheme in 1980. As concerned the need for legislation providing for compulsory contributions from employers to the financial resources of the scheme, they noted the Government's indication that participation was ensured indirectly through wage negotiations. It did not seem, however, that this indirect form of contribution would ensure the application of the Convention on this point. Under the Convention, contributions from employers could be dispensed with only in respect of national insurance schemes not restricted in scope to employed persons. With respect to the financial contributions to be made by the public authority, only a limited guarantee was made in the national legislation and, while they felt that the discrepancy was not great, the existing measures were not sufficient for the full application of this obligation. They noted that the requirements of the Convention with respect to the administration of the scheme by non-profit institutions reflected the times of the drafting of the Convention when very little had been known about how the market operated and there was a great fear of exposing pension schemes to market risks. But again, there was no question that the scheme existing in Chile was not in conformity with this provision. They noted the Government's indication that, while insured persons could not participate formally in the Pension Fund Administrations (AFPs), these AFPs were more efficient. They stressed, however, that efficiency was no substitute for formal participation. Finally, they noted that the Convention had been drafted in 1933 when the faith in the necessity for state control was the prevalent view and when there was little confidence in the positive effects of the market. At that time, it was inconceivable that a social insurance scheme could be operated by economically active enterprises. Sixty years later, the Convention requirements were the same. Perhaps the new scheme which was the subject of this case would indeed be very successful, but it was not in conformity with the Convention. They could see no way of resolving this discrepancy.

The Workers' member of Colombia indicated that he had taken the opportunity to get to know the Chilean social security system better by going to the country. He emphasized that this system represented the negation of all basic principles of social security: solidarity and universality. Through this system, a return had been made to the systems of pre-paid medicine, family compensation funds had been eliminated and only the system of financial capitalism was actually benefiting. He concluded that this model could only be imposed in a military or civil dictatorship and underlined the seriousness of this situation, which actually lay in the possibility that the system's bad example could be picked up by other Latin American countries and could have serious consequences for the development of an integral social security system. He suggested that the Committee of Experts make a comparative analysis of the impact of the previous system and of the present one.

The Workers' member of Nicaragua pointed out that, as expressed by the Government, it would appear that the problem was only one of accounting. He stated, however, that this was a Utopian view since everything changed when inflation diminished the real value of salaries. The old system and the present system were not the same because if they were, why did the Government not take the measures requested by the Committee of Experts? He noted that what was really happening was privatization which touched health, education and social security. He indicated that this was a problem which affected everyone, given that this model was spreading throughout Latin America. Efforts were being made to establish this model in Nicaragua as well. The worker's money was placed into forced savings reinvested in enterprises which in turn invested the funds for their own benefit, creating insecurity for the worker as to what might happen to the private company in the future. This was very different from investing the worker's money in social security. He concluded by expressing his certainty that the Government understood that the problem was not of an accounting nature, but rather a substantive one. Nevertheless, the Government had found a new source of funds with which it could carry out very good business deals.

The Workers' member of New Zealand, recalling that this case concerned non-compliance with specific technical requirements of a Convention which had been voluntarily ratified, urged the Committee to adopt firm conclusions and to recommend the Government to review its position and to take the necessary measures to ensure compliance with the Convention.

The Employers' member of Chile pointed out that account had not been taken of the fact that the former pension scheme in Chile had failed and that it was impossible to maintain a system based on redistribution. He indicated that it was necessary to take into consideration the results achieved by the new system: present pensions were 50 per cent higher than under the old system and workers actually did participate in private social security institutions, five of which were actually run by workers. Finally, he stated that there was no intention to export the system, but rather other countries which wanted to import it. This should give rise to reflection on the matter.

The Government representative pointed out that the former social security system, which approximately corresponded to the classical "Bismarckian" system, was being compared to the current system, which was adapted to the present situation of the country. It was not simply a new pension system; the present social security system covered, with 25 per cent of the national budget, the pensions of the former system as this had been in deficit. His Government was not present in this Committee in order to defend the new pension scheme in the country and Chile was a democracy in which this question was openly debated. He recognized that this was a question which could be discussed, but not in this meeting of this Committee where we did not come to discuss the technical merits of the new Chilean pensions system, but rather the strictly legal question of the application of the Convention. He expressed the hope that the Committee would take into account the fact that the Government intended to submit a detailed report in which it would refer to the considerations which would permit this conflict to be resolved.

The Committee noted the information provided by the Government, in particular the indication that the Convention, which dated back to 1933, adopted a "Bismarckian" model and that the pension scheme adopted in Chile in 1980 perfected the objectives of the Convention and was in line with the essential principles of modern social security. The Committee noted, in particular, that, according to the Government, the Convention had not been applied in Chile since 1980, when social security insurance went bankrupt. The Committee noted the absence of progress with respect to the questions which had been discussed on several occasions in this Committee concerning Articles 9 and 10 of the Convention. The Committee thus urged the Government to take measures to modify the legal pension scheme in the manner requested by the Committee of Experts and recalled the possibility of ILO technical assistance.

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A Government representative, the Under-Secretary of Social Welfare, pointed out, that, as already indicated to the Committee of Experts, the pension system had been reformed in 1980. This reform was made because the old system of social insurance presented great difficulties due to its rigidity causing injustice. Under the old scheme, the largest pension fund in Chile was the Social Security Fund to which Chilean workers paid contributions and received benefits when reaching the age of 65 years for men and 55 years for women, while workers could contribute to pension funds being able to receive benefits after a certain number of years, for example, 24 years in the case of bank employees. This led to a number of situations where certain sectors were privileged as compared to others. During different periods of government, attempts were made to reform this system but the privileged few blocked any changes. The Government was also led to change the system because there was a considerable deficit. Legislative Decree No. 3500 of 1980 established a new pension system, replacing the old system of distribution with the system of individual capital accumulation. This new scheme was funded by monthly contributions which the employer deducted from workers' wages. While the contributions came solely from the workers, the legislation permitted employers and workers to agree to a voluntary contribution by the employer in order to improve the amount of pension or permit early retirement. The Legislative Decree provided for an increase in workers' wages to cover the increase in contribution. Such agreements could be either individual or collective. Even though the new system established a pension scheme funded solely by workers' contributions, this did not mean that the workers' take-home pay was reduced in any way nor did it mean an increased cost to the employer as this was simply a question of accounting. As concerns the participation of the Government in the contribution to the resources of the funds of the obligatory pension scheme, section 73, et seq. of the Legislative Decree established the guarantee by the State (for those who have completed the requisite number of years of service) of a minimum old-age pension, thus making the necessary funds available when the contributions accumulated by the worker were not sufficient. As concerns Article 10, paragraphs 1 and 2, of the Convention, Legislative Decree No. 19069 of 1991 established as one of the main objectives of trade union organisations, federations, confederations and central organisations to constitute or participate in the constitution of pension-type funds or to associate with pension funds or health insurance institutions which permitted them, therefore, to participate directly in the management of such funds. It was no longer necessary for trade unions to create anonymous societies, but now workers could participate directly and actively in the management of their pension funds not only as users, but also as administrators of their own funds. The speaker considered that, with the adoption of this new provision, his Government was fully in conformity with the requirements of the Convention.

The Workers' members noted that this case had already been dealt with in the Conference Committee in previous years and that several observations had been made by the Committee of Experts. Furthermore, in 1984, a representation had been examined by a committee created by the Governing Body, which made recommendations to the Government. The real problem with respect to the application of this Convention was the reform leading to the privatisation of the pension insurance scheme. Even given the information provided by the Government, the comments made by the Committee of Experts were still valid. Two of the Committee's comments concerned the financing of the system. The Committee of Experts had noted that almost all of the contributions to the fund were made by the workers and there was no contribution on the part of the employers. Furthermore, the State did not provide sufficient financial contribution. On two other points, the Committee of Experts had noted that the workers were not able to participate actively in the management of the system and that the institutions should not be profit-making.

They noted that no progress had been made since this case had been discussed several years ago. They urged the Government to continue to provide information on the measures taken in reply to the comments made by the Committee of Experts and to review the recommendations made by the Committee set up by the Governing Body. Such action would be necessary to ensure the practical application of the pension insurance scheme in compliance with the Convention.

The Employers' members recalled that this case had been discussed a number of years ago and that four major points had been raised by the Committee of Experts. The first concerned the lack of employers' contributions to old-age insurance. They understood that the Convention provided that employers' contributions were necessary only if the insurance was compulsory for workers. They therefore requested the Government to provide further information on this point. As concerns the increase in wages to take into account contributions made by workers, they noted that, over time, this increase had very little real value. They recalled that, according to the Government, the state guarantee with respect to the entire fund replied to the question of state contribution. Furthermore, the Government had indicated that this guarantee was frequently made use of by people taking early retirement. They requested the Government to provide more detailed information on this question so that it could be fully examined. While noting that the Convention strictly prohibited the administration of insurance schemes by profit-making institutions, they wondered whether this Convention, which was adopted in 1933, reflected present-day views in this regard. Clearly, profit benefited the insurees. Of course, speculation with risk of loss should not be permitted. Nevertheless the state guarantee would ensure that there was no loss. In any event, the prohibition of profit-making institutions was quite clear in the Convention. Finally, they noted that the participation of workers in the management of the fund would depend upon the structure of the insurance system. Once again they requested the Government to supply more detailed information so that the Committee of Experts could determine whether the minimum requirements of participation had been met.

A Workers' member of the United States referred to the Workers' and Employers' members' statements and noted that there had been no substantial progress in this case. He suggested that a complete restructuring of the system was needed and requested the Government to carefully consider this alternative when replying to the questions raised by the Workers' and Employers' members.

The Workers' member of Chile pointed out that ever since the system of individual capital accumulation replaced the system of repartition, the workers of his country had expressed a number of concerns which are also reflected in the report of the Committee of Experts. In particular, the workers wanted to manage their own funds. In this regard, he recognised that some progress had been made with the new legislation which enabled workers to create associations for the management of pension funds. He expressed the hope, however, that the legislation would be further revised to enable the workers themselves to be the administrators of pension funds or directly participate in the management of such funds. Furthermore, under the new system, the number of years actually necessary for the right to a pension at retirement was 65 without taking into account the years of service. This is ifferent from the earlier scheme which provided for different ages of retirement. As the speaker considered that this retirement age was excessively high, he noted that a contribution from employers would be useful in order to reduce the actual working period required before retirement. Finally, the speaker noted that the two systems were actually coexisting. The repartition system consisted of workers who had decided not to affiliate with the new scheme and who had continued to contribute to the former centralised system under which contributions higher than for those affiliated to the new system had to be paid. On the other hand, workers who found themselves integrated in the new scheme were confronted with the problems noted in the Committee of Experts' report. They urged the Government, therefore, to review the situation with a view to solving the problems of workers retiring in their country.

A Workers' member of Argentina associated himself with the concerns raised by the Workers' member of Chile. These concerns were shared by everyone since the type of system was beginning to spread in Argentina and all of Latin America. He expressed his doubts concerning the funtioning of the new system since the workers could not participate in the management of their own funds and there was no guarantee as to what would happen to these funds at a time when these countries were facing serious economic difficulties. Furthermore, as could be noted in his own country, these funds were not generally invested for the benefit of national economic and social development. Often, these funds were invested in other countries. The manner in which these funds were being used now and would be used in the future was unknown.

The Government representative pointed out, in reply to the questions raised, that a radical change in the pension system had taken place in his country and that the Government wished to maintain this system and make the changes necessary for its perfection. A decision was taken that the worker would make contributions to the pension funds since it was to his benefit. With the implementation of the new scheme, a worker would continue to receive the same wage previously paid to him by the employer and the employer would pay exactly the same as he was paying previously. The difference was simply a matter of accountancy. The worker now had the right to choose the pension fund which granted the best guarantees and security whereas under the old system the worker was required to affiliate with a specific fund regardless of the advantages it provided. The new scheme is not a private pension system but rather a public system which the legislation by means of a commission on the classification of risks and the determination of where investments could be made. The instruments, which were deposited in the Central Bank of Chile, could not be handled in an arbitrary fashion. If part of the funds were invested abroad, this operation had to be based upon certain guarantees and had to be in compliance with the requirements which ensured full security and the necessary profitability so that workers could benefit in the future from a higher pension. Today, pensioners under the old scheme benefited from a minimum pension and it was hoped that, with the income of these funds, the pension levels would be be raised. As an alternative, an authorisation had been given to invest annually a certain percentage of the funds abroad. The increase in the amount of the funds would lead to the necessity of finding new possibilities for investment in the country. At present, regulations concerning investments were being drawn up by the commission on risk-classifications so that the funds could be invested in projects which would assure the necessary security and profitability. As concerns participation in management of the funds, the changes brought about by Legislative Decree No. 19069 of 1991 enabled trade union organisations to constitute their own administrative associations for pension funds without the previous requirement of creating an anonymous society. The present public system, which permitted regulated private administrations, would enable workers to obtain an adequate pension in relation to their contributions by providing the possibility of voluntary savings. With respect to the age-limit of 65 for men and 60 for women in order to obtain pension benefits, this age-limit was established only as concerns the state guarantee, but if a worker had the sufficient capital necessary to obtain a pension which was 10 per cent higher than the minimum he could retire at any age. There were two coexisting pension systems in his country which meant a high cost for the State. In replacing the repartition system, the Government had undertaken the cost of the contributions by paying the pensions of the previous scheme. At the same time, the State assumed the obligation to pay a "recognition bond" for the contributions made by workers who had changed from the old system to the new one. Finally, he recognised that he was speaking about a system which was different from that required by the Convention and therefore he understood the reason for the comments made by the Committee of Experts. He reiterated that there now existed a state system which permitted the direct participation of workers in the management of pension funds.

The Committee took note of the information supplied by the Government with some disappointment in view of the fact that the subject-matter had been previously under discussion in the present Committee. It felt that the progress made in meeting the suggestions of the Committee of Experts was not sufficient. The Committee therefore urged the Government to change its legal system as indicated in the Committee of Experts' report and recalled the possibility of ILO assistance in this regard.

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The Government has communicated the following information:

The Government has carefully and thoroughly analysed the observations made by the Committee of Experts on this Convention and on Conventions Nos. 36, 37 and 38. The outcome of this was the adoption of a series of measures, the details of which are given below.

The legislation in force in Chile envisages the participation of the public authorities in providing resources and insurance benefits. It had been established that if the accumulated resources did not cover the financing of the minimum pension, this has had to be ensured by the State. The legislation in force also provides that before an administration of pension funds was declared bankrupt, the State had to cover all the present and future obligations of the bankrupt body.

As for the measures adopted or envisaged to amend Legislative Decree No. 3-500 with the aim of having pensions administrated by non-profit bodies, as required by the Convention, except in some cases where the state administration entrusted institutions set up at the initiative of the persons concerned or groups of them, being duly recognised by the public authorities the Government notes that the Pension Fund Administration (called AFP PROTECTION) was set up in 1986. It was formed with capital contributions from workers affiliated to the Trade Union of the State Bank of Chile, one of the largest trade union organisations in the country.

In this way the AFP has assumed a trade union character. This is also the case for the group of copper mine supervisors (called CUPRUM) and for the body set up by workers in the education sector (called MAGISTER). With a view to the continued expansion of this method, the Labour Directorate is studying how to help trade union organisations in setting up Pension Fund Administrations. Furthermore, the Executive has prepared for legislative action a draft Act lowering the minimum capital necessary for the setting up of an AFP. In this way a larger number of such institutions could be set up, having a very special character, which would be the easiest for that particular sector of workers to set up. All of these methods are aimed precisely at having the workers themselves as the managers of these institutions.

In addition, it should be pointed out that measures have been adopted which objectively promote the creation of Pension Fund Administrations by workers with the natural consequence of ensuring their participation in the administration of them. If today's trend continues over time, there will be even more participation by the insured persons in their administrations.

Lastly, it should be pointed out that during 1986 the process of people's participation in the shareholding of the two biggest Pension Fund Administrations (AFP PROVIDA and AFP SANTAMARIA) came to an end.

This system had operated through credit and tax concessions aimed at all the workers of the country, so that the ownership of these institutions had been able to be widely dispersed. After this process, in the first months of the year it was agreed that the shareholders' councils of these AFPs would remain represented on the executive bodies of the new owners.

It must also be stressed that the Government has shown a clear desire to collaborate with the supervisory bodies of the ILO, for example, by introducing legislative amendments in line with the Committee of Experts' comments and which have been presented to all the supervisory bodies, including exceptional ones such as the Committee set up under article 24 of the ILO Constitution to examine the representations presented against Chile in 1984 and 1985. On all these occasions the Government has supplied full information, prepared in a timely and thorough manner.

In addition, a Government representative, the Deputy Minister of Labour, indicated that, after carefully analysing the observations made by the Committee of Experts, his Government had adopted a series of measures designed to give effect to the Conventions concerned.

In the first place, his country's legislation provided for the public authorities to contribute to the financial resources or benefits of insurance schemes by stipulating that, if the accumulated funds were not sufficient to finance a minimum pension, the State should make good the shortfall. The legislation also provided that, in the event of the bankruptcy of an institution administering a pension fund, the State should make good all present and future obligations of the bankrupt institution.

With regard to the measures adopted or envisaged for the amendment of Decree Law No. 3500 to ensure that pension funds were administered by non-profit-making institutions except in cases where their administration was entrusted to institutions founded on the initiative of the parties concerned or their organisations and duly approved by the public authorities, he informed the Committee of the establishment of an institution administering a "PROTECCION", which would complement institutions of a general nature. In that connection, the Directorate of Labour was studying how to help trade unions establish other institutions to administer pension funds. Also, to help workers set up such institutions without difficulty. the Executive Branch had put forward a Bill under which the minimum capital required for their establishment would be reduced. The purpose of all those measures was to encourage workers themselves to manage these pension fund institutions.

The Workers' members said that they had the impression that the Government was convinced of the need to adopt up-to-date legislation and practices in respect of the Conventions in question. The conclusions and recommendations formulated by the Committee set up by the Governing Body had clearly indicated the measures that should be adopted. It would be desirable if a new pension system were to replace the previous one. Under the Conventions under consideration, the institutions responsible for managing pension funds should not be profit making, except in cases where their administration was entrusted to institutions founded on the initiative of the parties concerned and duly approved by the public authorities. In that connection, the Government representative had stated that the establishment of various institutions administering pension funds in the form of limited liability companies under private law, and this was contrary to the Conventions. He had also indicated that measures had been adopted to secure workers' participation in the management of pension funds. It was therefore to be hoped that the Government would give effect to the conclusions and recommendations of the committee set up by the Governing Body, as well as to the comments formulated by the Committee of Experts.

The Employers' members expressed their agreement with the statement made by the Workers' members. Four basic questions emerged from the comments made by the Committee of Experts and from the conclusions and recommendations made by the committee set up by the Governing Body. They were: (1) the employers' contribution to the financial resources of compulsory insurance schemes, (2) the contributions of the public authorities to the financial resources or benefits of pension funds, (3) the management of pension insurance by institutions which were not profit making and (4) the participation of insured persons in the management of insurance institutions. The Committee of Experts had requested wholly pertinent information from the Government in respect of all those points. Consequently, the Government should be invited to reply to the questions posed by the Committee of Experts, which the Government would doubtless do.

The Government representative said that the new pension system would replace the previous one. The latter continued to exist solely in the case of insured persons whose interests would otherwise be adversely affected by a transfer to the new system. No worker entering the labour market could now join the old system, which existed solely for those workers who, because they had enjoyed special conditions or had contributed over many years, could not transfer their funds to the new system. With regard to the management of insurance funds by profit-making institutions, he referred to the conclusions and recommendations made by the committee set up by the Governing Body. In that connection, a series of measures had been taken to facilitate the management of insurance funds by the parties concerned. So far as the private nature of their management was concerned, he emphasised the guarantee provided by the State. His Government had taken note of the observations made by the Committee set up by the Governing Body and by the Committee of Experts and would supply the detailed information that had been requested.

The Committee took note of the information supplied by the Government representative with regard to the application of Conventions Nos. 35, 36, 37 and 38. In its comments, the Committee of Experts had taken up the conclusions and recommendations of the Committee set up by the Governing Body to examine the representation submitted under article 24 of the Constitution. Those conclusions pointed to divergencies with the Conventions with regard to various important aspects. Consequently, the present Committee hoped that the Government would take the necessary measures to ensure that the respective Conventions were fully implemented and that it would be able to report on the progress made in that connection.

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Follow-up to the recommendations of the tripartite committees set up to examine the representations made in 1986 and 2000 by the National Trade Union Coordinating Council of Chile and a number of national trade unions of workers of private sector pension funds (AFPs)

With reference to the recommendations of the tripartite committees, the Government recalls that various proposals to modify the pensions system are currently under consideration. It should be noted that the Presidential Advisory Commission on the Pensions System has examined three proposals for overall solutions. In total, no fewer than 58 proposals have been approved and grouped on the basis of their objectives. With regard to the recommendation to ensure that the privately administered pensions system created by Legislative Decree No. 3500 of 1980 is administered by non-profit-making institutions, one of the proposals supported by 11 of the 24 members of the Advisory Commission is to transform the current solidarity scheme into a social insurance scheme to become the centrepiece of a possible new retirement system with tripartite financing. This proposal would involve the creation of two new institutions: (i) a social insurance institution responsible for the affiliation of insured persons and the collection of contributions; and (ii) a collective retirement fund responsible for the administration, investment and provision of pensions. If this proposal were to be adopted, it would allow for the inclusion of a public component in the administration of the pensions system, combined with the creation of a public non-profit-making pension fund administrator (AFP), although governed by the same regulations as the private AFPs established under Legislative Decree No. 3500 of 1980.

With regard to the recommendation that representatives of insured persons should be able to participate in the administration of the system, the Government indicates that the pensions reform of 2008, as set out in Act No. 20255, promoted the modernization and reinforcement of the institutional framework of the retirement benefit system, particularly through the establishment of two advisory bodies: the users’ committee and the Pensions Advisory Council. The Government nevertheless considers that progress can still be made in guaranteeing more active social dialogue between workers, employers and the Government, particularly by: extending the powers of the Advisory Council to include not only the retirement benefits system based on solidarity, but the whole of the integrated pensions system; granting it the mandate to commission and disseminate actuarial studies of the retirement benefits system; and assessing, based on actuarial studies, the adequacy of current contribution rates in the system and making proposals for changes, where appropriate. Consideration is also being given to the inclusion of at least one workers’ representative and a minimum level of representation of women in any future public AFP.

Finally, with regard to the recommendation that employers should participate in the financing of old-age and invalidity benefits, the Government indicates that two of the proposals examined by the Advisory Commission envisage the establishment of an employers’ contribution to the financing of the retirement benefits system.

The Committee notes the various proposed reforms of the pensions system and hopes that the solutions selected will make it possible to give effect to the recommendations adopted by the Governing Body referred to above within a reasonable period of time.

Follow-up to the recommendations of the tripartite committee set up to examine the representation made by the College of Teachers of Chile AG under article 24 of the ILO Constitution

In reply to the Committee’s previous comments on this subject, the Government indicates that, in the context of the education reform and the dialogue launched between the Ministry of Education and the College of Teachers of Chile AG in the technical committee set up by the parties, it has been possible to conclude political and social agreements for the adoption of a series of laws benefiting teachers: Act No. 20804 of 2015 for the titularization of teachers covered by subsidized public contracts; Act No. 20822 of 2015 on the recognition of contribution years in the event of voluntary retirement; Act No. 20903 of 2016 establishing the system of further vocational training for teachers, which has had the effect of increasing the remuneration of teachers by an average of 30 per cent and is intended to reinforce the public education system and the role of the State as the employer of education professionals. The Government also refers to the existence of a Bill to establish a public education system, which will have an impact on the transfer of teachers from municipal authorities to the local services of the Ministry of Education. The Government indicates that this series of measures will make it possible to give effect to the recommendations issued in the context of the representation referred to above, by improving the administration by the State of the education system, bringing an end to its decentralization and to the heterogeneous nature of municipal budgets, and entrusting it to local services under the responsibility of the central authority. This will result in the improved management of the payment of retirement contributions, and the conditions of retirement for teachers will therefore be improved. According to the Government, social dialogue, and not only political dialogue, has given rise to these significant legal reforms that reinforce the public education system, while taking into account the concerns of the College of Teachers of Chile AG.

With regard to the reform of the pensions system, the Government recalls that, following the 2008 reform of the pensions system (Act No. 20255), a new pillar based on solidarity financed through public funds was introduced, in addition to the individual capital accumulation system, with the State thereby recognizing its role in guaranteeing the social security system. Over the period covered by the report, the President convened a Presidential Advisory Commission, composed of national and international experts, to review the retirement benefits system and produce an assessment and reform proposals intended to overcome the shortcomings identified in the system, particularly those related to the adequacy of the pensions received by low-income categories of the population. The Commission submitted its report, accompanied by recommendations, in September 2015, and the Committee of Ministers was requested to develop a programme consisting of medium- and long-term measures to improve the retirement benefits system. In this context, in August 2016, the Government proposed a further reform of the retirements benefits system, the main elements of which include: the establishment of a solidarity-based collective savings pillar; the reinforcement of the solidarity-based pillar created in 2008; the amendment of the legal regime governing AFPs with a view to guaranteeing the participation of workers in investment decisions, reducing costs and ensuring transparent administration; the creation of a public AFP; improved coverage of self-employed workers; and the revision of the legislation as a whole to prevent distortions.

The Committee notes this information and hopes that the reforms carried out will result in time in greater legal security in the conditions of service of teachers, particularly in relation to their pension rights, and the adoption on this basis of practical measures giving effect to the recommendations of the tripartite committee, as adopted by the Governing Body, with a view to increasing the level of the retirement benefits of teachers employed by municipal authorities. Please provide further information on this subject in the next report.

Observations of the National Confederation of Municipal Employees of Chile (ASEMUCH)

With reference to the observations made in 2011 by ASEMUCH considering that the remuneration taken into account for the purposes of the pensions of municipal employees under the terms of Legislative Decree No. 3501 had been unjustly restricted to the basic wage, with the exclusion from the calculation of certain other components of their remuneration, the Government refers to Opinion No. 15446 of 8 March 2013 of the Court of Accounts, under the terms of which there is no requirement to take into account for the purposes of the old-age pension certain components of the remuneration of municipal teachers solely intended to prevent a decrease in the net wages paid as of 28 February 1981, as these consist of bonuses intended to compensate for the fact that the teachers had been made responsible for paying the whole of their old-age insurance contributions. This measure was therefore essentially of a compensatory and transitional nature. As a result, the increase in the amounts established by Legislative Decree No. 3501 was merely intended to maintain the level of earnings of the workers as of 28 February 1981, and cannot be considered in the same light as the additional remuneration received subsequently. However, the allowances established as from 28 February 1981, which are not taken into account in the context of the increases established by Legislative Decree No. 3501, are generally taxable, and therefore subject to social security contributions. The Government considers that accordingly there is no violation of Conventions Nos 35 and 37, particularly with regard to the determination of the wage or remuneration taken into account for the calculation of contributions. The Committee notes this information.

Observations made by the National Association of Public Employees, the Association of Employees of the Women’s National Service, the College of Teachers of Chile AG, the National Confederation of Business and Services and the Confederation of Unions in the Banking and Financial Sectors of Chile

The Government indicates that the Presidential Advisory Commission is of the view that measures should be taken to ensure greater equity between the sexes in relation to the level of pension benefits, and equality of entitlements and obligations for men and women. The Advisory Commission therefore proposes the elimination of mortality tables differentiated by gender and the introduction of a unisex table. It is also proposed to reinforce compensation measures intended to remedy factors of differentiation that currently exist, both in the labour market and in the household, particularly through the recognition of the unpaid work carried out by women in the household. The Government indicates that the President has requested a ministerial committee to determine, based on the findings of the Presidential Advisory Commission, the reforms that are necessary in the short and medium terms and to determine issues which, in view of their complexity, require more detailed examination with a view to overcoming the shortcomings of the current retirement benefits system. The Committee endorses the approach of spacing out over time the required reforms based on in-depth studies in view of the fundamental nature for social security of the issue of equality between men and women, particularly in relation to pensions. In view of the interest raised by this issue among all member States, the Committee requests the Government to provide full explanations on this subject in its next report.

Conclusions and recommendations of the Standards Review Mechanism. Noting the Government’s indication that the suggestion of the Committee of Experts to envisage the ratification of the Social Security (Minimum Standards) Convention, 1952 (No. 102), will be drawn to the attention of the social and political partners in the context of the dialogue intended to improve the retirement benefits system, the Committee recalls that, at its 328th Session in October 2016, the Governing Body of the ILO adopted the conclusions and recommendations formulated by the Standards Review Mechanism Tripartite Working Group (SRM TWG), recalling that Conventions Nos 35, 36, 37 and 38 to which Chile is party are outdated and charging the Office with follow-up work aimed at encouraging States party only to these Conventions to ratify the Invalidity, Old-Age and Survivors’ Benefits Convention, 1967 (No. 128), and/or the Social Security (Minimum Standards) Convention, 1952 (No. 102), and accept, inter alia, the obligations under its Parts V and IX, as these represent the most up-to-date instruments in this subject area. The Committee reminds the Government of the availability of ILO technical assistance in this regard.

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Follow-up to the recommendations of the tripartite committee representations made under article 24 of the ILO Constitution by the College of Teachers of Chile AG

The Committee takes due note of the adoption by the Governing Body at its 323rd Session (March 2015) of the recommendations of the tripartite Committee set up to examine the representation made under article 24 of the ILO Constitution by the College of Teachers of Chile AG in 2009, alleging non-observance of the Old-Age Insurance (Industry, etc.) Convention, 1933 (No. 35), and the Invalidity Insurance (Industry, etc.) Convention, 1933 (No. 37).

It notes, in particular, that the Governing Body noted the will of the Ministry of Education to improve the teachers’ wage and welfare conditions through social dialogue and to find a durable solution to the pension issues raised in the representation by establishing, together with the College of Teachers of Chile AG, a technical board, which is expected to submit concrete proposals to that end and to deliver its final report at the end of the first semester of 2015. The Governing Body also encouraged all parties concerned to reach a viable agreement in the very near future and requested the Office to provide the parties to the representation with any technical, consultative or conciliatory services and good offices, which they may request. The Governing Body ultimately requested the Government to send reports under article 22 of the ILO Constitution on the application of Conventions Nos 35 and 37 by 1 September 2015 containing detailed information on the measures taken to give effect to the conclusions and recommendations made by the tripartite Committee, as well as on the solutions advanced through social dialogue within the work of the joint technical board established by the Ministry of Education and the College of Teachers of Chile AG. These reports will be examined by the Committee of Experts on the Application of Conventions and Recommendations in relation to the follow-up on the recommendations adopted by the Governing Body in 1999 and 2006 on the previous representations submitted by the College of Teachers of Chile AG on similar issues.

Noting, however, that the Government’s report has not been received, the Committee urges the Government to provide, for examination at its next session, all the information requested with respect to how the Government has followed up on the recommendations of the tripartite Committee which were formulated as follows:

• – take the measures necessary for acquiring and preserving pension rights of the municipal teachers in conditions of legal certainty, uniform implementation and enforcement required for the proper functioning of the pension scheme based on capital accumulation accounts, in particular:

(i) to accept the responsibility, in compliance with Article 10(5) of the Convention and Article 11(5) of Convention No. 37, for the administrative and financial supervision of the collection and payment of pension insurance contributions by the municipalities and municipal bodies employing the teachers, establish effective mechanisms for recuperation of arrears of unpaid contributions and, where necessary for this purpose, provide appropriate contributions by the public authorities to the financial resources of the municipalities or to the pension benefits of the teachers, in compliance with Article 9(4) of Convention No. 35 and Article 10(4) of Convention No. 37;

(ii) to ensure participation of the representatives of the teachers and other categories of insured persons in the management of their pension schemes, including collection of insurance contributions and supervision of their effective payment into respective schemes by the municipalities and other employers in respect of their employees, in compliance with Article 10(4) of Convention No. 35 and Article 11(4) of Convention No. 37, and to engage the process of dialogue with the representatives of the teachers for this purpose;

(iii) to improve the effectiveness of dispute resolution and appeal mechanisms in pension matters concerning municipal employees, ensure prompt rendition of justice in these cases and execution of court decisions engaging the liability of the municipalities for unpaid contributions, in line with Article 11 of Convention No. 35 and Article 12 of Convention No. 37.

Observation submitted by the National Confederation of Municipal Employees of Chile (ASEMUCH). In a communication received on 30 May 2011, ASEMUCH considers that the remuneration taken into account to compute the pensions of municipal employees within the meaning of Legislative Decree No. 3.501 is unjustly restricted to their basic wage, excluding a number of other components of their remuneration in the calculations, and therefore violates Conventions Nos 35 and 37. According to ASEMUCH, taking into account only the basic wage for calculating the pension results from a misinterpretation of the term “in the portion subject to taxation” contained in section 2 of Legislative Decree No. 3.501, which is taken to be synonymous with the term “remunerations subject to taxation”. This interpretation is not consistent with section 5 of the abovementioned Decree, under which social insurance contributions are not paid on the total remuneration, considering that the portion that exceeds 50 times the monthly living wage is exonerated from contributions. ASEMUCH maintains that this restrictive interpretation of remuneration considered for pension purposes has resulted in reducing the level of contributions, the amount of funds constituted for pension purposes and, consequently, has also reduced the level of old-age and invalidity pensions paid to retirees.

In its latest report received in September 2012, the Government stated that the reply to comments from ASEMUCH is still being prepared by the Court of Accounts (Contraloría General de la República), in cooperation with the Under-Secretariat of Social Welfare and the authority responsible for monitoring pensions (Superintendencia de Pensiones), and will be sent as soon as it is available.

The Committee notes that the report which should have been submitted by the Government by 1 September 2015 would also have contained information in respect of the allegations raised by ASEMUCH. It also notes that ASEMUCH submitted additional information on 1 September 2015 on developments relating to the allegations. The Committee therefore requests the Government to supply a comprehensive reply to the allegations made by ASEMUCH in its next report taking into account the above conclusions and recommendations adopted by the tripartite Committee set up to examine the above representation.

Noting that the Government’s report has not been received, the Committee repeats its previous pending comments regarding the below issues:

Follow-up to the recommendations of the tripartite Committees. Representations made in 1986 and 2000 under article 24 of the ILO Constitution by the National Trade Union Coordinating Council (CNS) and a number of national trade unions of workers of the Private Sector Pension Funds (AFPs)

The Committee recalls that the non-observance by Chile of this Convention and the Invalidity Insurance (Industry, etc.) Convention, 1933 (No. 37), following the reform of the pension system in 1980, has been recognized for many years. This issue has given rise to two representation procedures under article 24 of the ILO Constitution in 1986 and 2000. In both cases, the Governing Body concluded that the Conventions in question were not complied with and called upon the Government to amend the national legislation to ensure that the privately managed pension scheme established by Legislative Decree No. 3.500 of 1980 be administered by non-profit-making organizations; that representatives of the insured are able to participate in the administration of the system; and that employers contribute to the financing of the old-age and invalidity benefits.

In its latest report, the Government does not refer to any amendments made to the private pension scheme which are likely to give effect to the abovementioned recommendations. For the most part, the Government provides information on the repercussions of Act No. 20.255 of 2008 on the Chilean social insurance scheme. The Committee notes that the reform of 2008, apart from the fact that it established a minimum pension scheme subject to a means test funded by the state budget, did not change the basic characteristics of the private pension scheme, in so far as, inter alia, the latter does not guarantee a defined benefit throughout the contingency and excludes the representatives of insured persons from participating in the administration of the pension fund. The social pensions based on the principle of solidarity established under Act No. 20.255 are non-contributory old-age and invalidity benefits paid to persons who are not entitled to a pension under other old-age insurance schemes, and who belong to the 60 per cent of the poorest households in the country. In this respect, these benefits cannot be considered as old-age and invalidity benefits in the context of Conventions Nos 35, 36, 37 and 38, as these Conventions provide for defined contributory benefits paid by old-age or invalidity insurance schemes. The Committee draws the Government’s attention to the possibility of carrying out an evaluation – by having recourse if necessary to ILO technical assistance – of the conformity of the solidarity-based pillar created under Act No. 20.255 with the requirements of Part V (Old-age benefit) and IX (Invalidity benefit) of the Social Security (Minimum Standards) Convention, 1952 (No. 102), which make it possible to give effect to these provisions by providing benefits to all residents whose means during the contingency do not exceed prescribed limits.

Communication submitted by the National Association of Public Employees (ANEF), the Association of Employees of the Women’s National Service, the College of Teachers of Chile AG, the National Confederation of Business and Services, and the Confederation of Unions in the Banking and Financial Sectors of Chile. The Committee notes the information sent by ANEF, the Association of Employees of the Women’s National Service, the College of Teachers of Chile AG, the National Confederation of Business and Services and the Confederation of Unions in the Banking and Financial Sectors of Chile, which was received at the Office on 15 September 2011. According to these organizations, the private pension scheme based on a funded pension plan results in discrimination against women in so far as it is based on sex-distinct mortality tables. This means that a man and woman with exactly the same amount in their capital accumulation accounts when they retire will receive different pensions entirely on account of their gender. In its reply, the Government states that the use of sex-distinct mortality tables to calculate men’s and women’s pensions is justified because women have a higher life expectancy. Using unisex tables would undoubtedly increase the pension level of women, but it would result in the available capital in women’s capital accumulation accounts being depleted more quickly. The Presidential Advisory Council for the pension scheme reform carried out studies on the introduction of unisex mortality tables and rejected this possibility for a number of reasons, among which: the risk that the insurance companies’ reserves might be inadequate; a reform of this nature would imply cross-subsidization between men and women: the lack of a comparative basis at international level, since no other country with a funded pension scheme has introduced unisex tables.

The Committee notes that the disparity between the pensions paid to men and women under the private pension scheme is a direct consequence of the nature of the system based on the capital accumulation retirement accounts of the beneficiaries. The Committee notes in this respect that, more than 30 years ago, the Supreme Court of the United States already considered that the Civil Rights Act of 1964 banned a contribution differential on the basis of sex in the context of a pension plan (City of Los Angeles v. Manhart, 435 U.S. 702, 98 S. Ct. 1370 (1978)). The Committee also notes that in 2011 the European Court of Justice ruled that different insurance premiums for women and men constituted sex discrimination and was not compatible with the Charter of Fundamental Rights (Test-Achats Case (C-236/09)). The Committee is also of the understanding that, in a resolution adopted in 2010, the Constitutional Court of Chile ruled that a gender criterion in risk factor tables used in the private insurance health scheme was unconstitutional (section 38 of Act No. 18.933 (Isapres)). In view of the preceding considerations, the Committee invites the Government to avail itself of the technical assistance of the Office so that it might study in greater detail the implications of using unisex mortality tables on women’s pensions and the ways to offset the negative effects caused by this practice.

[The Government is asked to reply in detail to the present comment in 2016.]

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Follow-up to the recommendations of the Tripartite Committees. Representations made in 1986 and 2000 under article 24 of the ILO Constitution by the National Trade Union Coordinating Council (CNS) and a number of national trade unions of workers of the Private Sector Pension Funds (AFPs)

The Committee recalls that the non-observance by Chile of this Convention and the Invalidity Insurance (Industry, etc.) Convention, 1933 (No. 37), following the reform of the pension system in 1980, has been recognized for many years. This issue has given rise to two representation procedures under article 24 of the ILO Constitution in 1986 and 2000. In both cases, the Governing Body concluded that the Conventions in question were not complied with and called upon the Government to amend the national legislation to ensure that the privately managed pension scheme established by Legislative Decree No. 3.500 of 1980 be administered by non-profit-making organizations; that representatives of the insured are able to participate in the administration of the system; and that employers contribute to the financing of the old-age and invalidity benefits.

In its latest report, the Government does not refer to any amendments made to the private pension scheme which are likely to give effect to the abovementioned recommendations. For the most part, the Government provides information on the repercussions of Act No. 20.255 of 2008 on the Chilean social insurance scheme. The Committee notes that the reform of 2008, apart from the fact that it established a minimum pension scheme subject to a means test funded by the state budget, did not change the basic characteristics of the private pension scheme, in so far as, inter alia, the latter does not guarantee a defined benefit throughout the contingency and excludes the representatives of insured persons from participating in the administration of the pension fund. The social pensions based on the principle of solidarity established under Act No. 20.255 are non contributory old-age and invalidity benefits paid to persons who are not entitled to a pension under other old-age insurance schemes, and who belong to the 60 per cent of the poorest households in the country. In this respect, these benefits cannot be considered as old-age and invalidity benefits in the context of Conventions Nos 35, 36, 37 and 38, as these Conventions provide for defined contributory benefits paid by old-age or invalidity insurance schemes. The Committee draws the Government’s attention to the possibility of carrying out an evaluation – by having recourse if necessary to ILO technical assistance – of the conformity of the solidarity-based pillar created under Act No. 20.255 with the requirements of Part V (Old-age benefit) and IX (Invalidity benefit) of the Social Security (Minimum Standards) Convention, 1952 (No. 102), which make it possible to give effect to these provisions by providing benefits to all residents whose means during the contingency do not exceed prescribed limits.

Communication submitted by the National Association of Public Employees (ANEF), the Association of Employees of the Women’s National Service, the College of Teachers of Chile AG, the National Confederation of Business and Services, and the Confederation of Unions in the Banking and Financial Sectors of Chile. The Committee notes the information sent by ANEF, the Association of Employees of the Women’s National Service, the College of Teachers of Chile AG, the National Confederation of Business and Services and the Confederation of Unions in the Banking and Financial Sectors of Chile, which was received at the Office on 15 September 2011. According to these organizations, the private pension scheme based on a funded pension plan results in discrimination against women in so far as it is based on sex-distinct mortality tables. This means that a man and woman with exactly the same amount in their capital accumulation accounts when they retire will receive different pensions entirely on account of their gender. In its reply, the Government states that the use of sex-distinct mortality tables to calculate men’s and women’s pensions is justified because women have a higher life expectancy. Using unisex tables would undoubtedly increase the pension level of women, but it would result in the available capital in women’s capital accumulation accounts being depleted more quickly. The Presidential Advisory Council for the pension scheme reform carried out studies on the introduction of unisex mortality tables and rejected this possibility for a number of reasons, among which: the risk that the insurance companies’ reserves might be inadequate; a reform of this nature would imply cross-subsidization between men and women: the lack of a comparative basis at international level, since no other country with a funded pension scheme has introduced unisex tables.

The Committee notes that the disparity between the pensions paid to men and women under the private pension scheme is a direct consequence of the nature of the system based on the capital accumulation retirement accounts of the beneficiaries. The Committee notes in this respect that, more than 30 years ago, the Supreme Court of the United States already considered that the Civil Rights Act of 1964 banned a contribution differential on the basis of sex in the context of a pension plan (City of Los Angeles v. Manhart, 435 U.S. 702, 98 S. Ct. 1370 (1978)). The Committee also notes that in 2011 the European Court of Justice ruled that different insurance premiums for women and men constituted sex discrimination and was not compatible with the Charter of Fundamental Rights (Test-Achats Case (C-236/09)). The Committee is also of the understanding that, in a resolution adopted in 2010, the Constitutional Court of Chile ruled that a gender criterion in risk factor tables used in the private insurance health scheme was unconstitutional (section 38 of Act No. 18.933 (Isapres)). In view of the preceding considerations, the Committee invites the Government to avail itself of the technical assistance of the Office so that it might study in greater detail the implications of using unisex mortality tables on women’s pensions and the ways to offset the negative effects caused by this practice.

Communication submitted by the National Confederation of Municipal Employees of Chile (ASEMUCH). In a communication received on 30 May 2011, ASEMUCH considered that the remuneration taken into account to compute the pensions of municipal employees within the meaning of Legislative Decree No. 3.501 had unjustly been restricted to their basic wage, excluding a number of other components of their remuneration in the calculations, and had therefore violated Conventions Nos 35 and 37. According to ASEMUCH, taking into account only the basic wage for calculating the pension results from a misinterpretation of the term “in the portion subject to taxation” contained in section 2 of legislative Decree No. 3.501, which is taken to be synonymous with the term “remunerations subject to taxation”. This interpretation is not consistent with section 5 of the abovementioned Decree, under which social insurance contributions are not paid on the total remuneration, considering that the portion that exceeds 50 times the monthly living wage is exonerated from contributions. ASEMUCH maintains that this restrictive interpretation of remuneration considered for pension purposes has resulted in reducing the level of contributions, the amount of funds constituted for pension purposes and, consequently, has also reduced the level of old-age and invalidity pensions paid to retirees. In its report received by the Office on 21 September 2012, the Government states that the reply to comments from ASEMUCH is still being prepared by the Court of Accounts (Contraloría General de la República), in cooperation with the Under-Secretariat of Social Welfare and the authority responsible for monitoring pensions (Superintendencia de Pensiones), and will be sent as soon as it is available.

The Committee notes that the comments from ASEMUCH concern the damages incurred by the social security system, as a result of the failure to take into account certain components of municipal workers’ pay apart from the basic wage when calculating old-age and invalidity contributions. It notes, in the light of the information submitted by ASEMUCH, that these components of municipal workers’ remuneration which are not subject to old-age and invalidity contributions are taxed in some cases and not in others. Without pre-empting the information that the Government might send in its forthcoming reply, the Committee recalls that, in the context of recent procedures under article 24 of the Constitution (see GB.298/15/6), of which it assumes the follow-up, the ILO Governing Body adopted the conclusions of the Tripartite Committee set up to examine the representation, concluding that the Government was directly responsible for the financial and moral prejudice suffered by the categories of workers concerned. In this particular case, the fact that these components of remuneration were indeed due to the municipal workers is not questioned; they seem moreover to have been collected by the municipal employees, but they were not included in the contribution base as regards old-age and invalidity insurance. On this matter, the Committee would like to recall that under Article 7(3) of the Convention, when contributions are graded according to remuneration, the remuneration taken into account for this purpose shall also be taken into account for the purpose of computing the pension. Furthermore, according to Article 10(5) of the Convention, the public authorities are responsible for the administrative and financial supervision to ensure the proper running of the old-age and invalidity insurance scheme. This responsibility also includes that of ensuring that all the rights and obligations of the parties are respected and that all contributions due which have been or should have been collected, have indeed been collected effectively. The Committee therefore requests the Government to provide detailed explanations on the matter and to indicate whether it has fulfilled the obligation incumbent upon it to guarantee the effective payment of all old-age and invalidity contributions due.

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The Committee notes the comments on the application of Conventions Nos 35 and 37 received from the National Confederation of Municipal Employees of Chile (ASEMUCH) on 30 May 2011 with respect to the determination of remuneration taken into account to compute old-age pensions; as well as the collective comments on Conventions Nos 35 and 36, from the National Association of Public Employees (ANEF), the Association of Employees of the Women’s National Service, the College of Teachers of Chile A.G., the National Confederation of Business and Services, and the Confederation of Unions in the Banking and Financial Sectors of Chile, dated 15 September 2011, with respect to the differences in the rates of old-age pensions granted to men and women by the private pension system. The Government is invited to reply to these comments in its next report due by 1 September 2012.

With regards to the representation made by the College of Teachers AG in 2009 under article 24 of the ILO Constitution alleging non-observance by Chile of Conventions Nos 35 and 37, the Governing Body has referred the matter for examination to a tripartite committee set up to this effect at its 311th Session (June 2011). In accordance with its usual practice, the Committee has decided to suspend the examination of this issue awaiting the end of the article 24 procedure.

Finally, the Committee hopes that, in its next report, the Government will provide detailed information on the follow-up given to the recommendations made by the tripartite committees established to examine:

• -the representations made in 1985 by the National Trade Union Coordinating Council (CNS) (ILO Official Bulletin Vol. LXXI, 1988, Series B, Supplement 1) and in 1998 by a number of national trade unions of workers of the private sector pension funds (AFPs) (document: GB.277/17/5); and
• -the representations made in 1997 and 2004 by the College of Teachers of Chile A.G. (documents: GB.274/16/4 and GB.298/15/6).

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Follow-up to the recommendations of the Tripartite Committee
(representations made under article 24 of the Constitution of the ILO)

1. Representation made by the National Trade Union Coordinating Council (CNS) and a number of national trade unions of workers of the Private Sector Pension Funds (AFPs). The Committee recalls that the non-observance by Chile of Convention No. 35 and the Invalidity Insurance (Industry, etc.) Convention, 1933 (No. 37), following the reform of the pensions system in 1980 has been recognized for many years. This issue has given rise to several representation procedures under article 24 of the ILO Constitution, in the context of which, in 1986 and 2000, the Governing Body concluded that the Conventions in question were not complied with and entrusted the Committee of Experts with the task of supervising the implementation of its conclusions and recommendations. These conclusions and recommendations called on the Government to amend the national legislation to ensure that the privately managed pension system established by Legislative Decree No. 3.500 of 1980 is administered by non-profit-making organizations; that representatives of the insured are able to participate in the administration of the system; and that employers contribute to the financing of the old-age and invalidity benefits. The Committee recalls that, in view of the absence of adequate measures taken by the Government to give effect to the recommendations of the Governing Body, this case has already been discussed on repeated occasions in the Conference Committee on the Application of Standards in 1987, 1993, 1995, 2001 and, most recently, in 2009. During the most recent Conference Committee discussion of the case, the Government recognized that the privately managed pension system established in 1980 was not in accordance with the basic principle for social security systems encouraged by the ILO in a context of tripartism and the Government indicated that a legislative reform in 2008 (Act No. 20.255) had resulted, with ILO technical assistance, in the most significant social reform through the establishment, in addition to the existing pension system of a system of minimum pensions based on the principle of solidarity, under which the total number of beneficiaries in December 2008 would be 600,000, rising to nearly 1,200,000 beneficiaries in December 2012.

In its examination of the present case in 2009, the Committee considered that this reform did not give effect to recommendations of the Governing Body as the 2008 reform did not modify the general logic of the Chilean pension system, which remains based on individual saving capacity: persons who are in employment are still required by law to be affiliated to a profit-making pension fund and have to pay into their individual capital accumulation account a percentage of their remuneration, without employers also being required by law to contribute to the financing of benefits. In this respect, the Committee observed that the reform not only maintained the private pension fund administrators (AFPs) as the principal mechanism for old-age protection, but in effect reinforced their position because, if their private management generates pensions that are not sufficient to cover at least the essential needs of the pensioner, these insufficient amounts will be supplemented by an old-age pension (APS) financed through national solidarity and paid to persons whose retirement pensions do not reach a minimum threshold.

In its latest report, the Government confines itself to confirming that the privately managed pension system is administered by profit-making institutions. According to the information provided by the Worker members during the discussion of the case at the Conference in 2009, 30 per cent of the profits made on the funds resulting from the contributions paid by workers thereby go to pension fund administrators, in addition to the management fees for the funds. The Committee notes with continuing concern that the management of the system by private profit-making companies gives rise to considerable losses for workers, who are thereby denied part of the profits made by the contributions that they pay into their capital accumulation accounts.

With regard to the issue of the participation of insured persons in the administration of the system, the Government indicates that the reform introduced by Act No. 20.255 was intended to ensure better representation of insured persons in the administration of pension funds by establishing a users’ commission composed of representatives of workers, retirees, public institutions and private institutions, and that the commission is chaired by a university professor. According to the Government, the function of this commission is to ensure the accuracy of the information provided to users on the basis of which they make their decisions when selecting their pension fund. On 10 May 2010, the users’ commission issued its first report containing, inter alia, proposals relating to the various aspects of the operation of the pensions system. In this respect, the Committee notes that the creation of the users’ commission, although representing a step in the right direction, still does not guarantee the representatives of insured persons the right to be able to participate in the administration of their pension funds, as required by the Conventions under examination. The Government is therefore requested to take the necessary measures to ensure, in accordance with the Conventions under examination, that the representatives of insured persons participate in the administrative bodies of AFPs, and in particular those that determine investment policies. The Committee emphasizes in this respect that other countries which have also adopted capital accumulation systems have established systems of administration that guarantee the participation of insured persons.

Finally, with regard to the need to ensure the collective financing of pensions, the Government indicates in its latest report that the reform of the system introduced by Act No. 20.255 of 2008 has had the effect of making employers responsible for invalidity and survivors’ insurance contributions. In the case of enterprises employing 100 persons or more, this new measure entered into force on 1 June 2009 and will be extended to all enterprises from 1 July 2011. The Committee notes that this reform has not had an impact on the financing of old-age pensions, which remain exclusively financed by workers. The Committee nevertheless welcomes that it establishes the practice of contribution by employers to the invalidity and survivors protection scheme, thereby introducing the principle of the collective financing. The Committee notes, however, that the level of the contributions that are solely to be paid by employed persons (namely old-age contributions and deductions from wages for the administration of pension funds) represents 11.5 per cent of the monthly wage of employed persons, while the contribution of employers to the financing of invalidity and survivors’ benefits is equivalent to only 1.87 per cent of the wage. The Committee hopes that this is only a first step by the Government with a view to establishing a better balance between the contributions of employers and of workers to the financing of old-age, invalidity and survivors’ insurance schemes. As an informational matter, the Committee observes in this respect that Social Security (Minimum Standards) Convention, 1952 (No. 102), provides that the total of the insurance contributions to be paid by protected employed persons should not exceed 50 per cent.

In view of all of the substantive questions arising in relation to the application of the Convention, the Committee encourages the Government to continue having recourse to the technical assistance of the Office, as it has done in recent years, with a view to continuing the reform of the Chilean retirement pensions system based on the principles of solidarity, the sharing of risks, and collective financing, which are the essence of social security, combined with the principles of transparent, responsible and democratic administration of the pensions scheme by institutions that are not profit making, with the participation of the representatives of the insured persons.

2. Representations made by the College of Teachers of Chile AG. In 1999 and 2007, in the context of two representations made by the College of Teachers of Chile AG alleging non-observance by Chile of Conventions Nos 35 and 37 on the grounds of non‑payment of part of the social security contributions based on the gross remuneration of teachers, the Governing Body approved the reports of the tripartite committees established by virtue of article 24 of the ILO Constitution. These reports found that the Conventions had not been observed and called on the Committee of Experts to follow up the recommendations in the reports. In the first case, the Government was called upon to guarantee the payment by municipal authorities of the social security contribution arrears for teachers so that they could lay claim to full social security benefits, and particularly old-age and invalidity benefits. In the second case, the Governing Body concluded that it was the responsibility of the State to guarantee the payment of the debt in relation to the social security system resulting from the non-payment to teachers by the municipal authorities of an education subsidy which constituted a component of remuneration on the basis of which social security contributions are calculated and which therefore results in a decrease in social security benefits.

The Committee notes that, according to the information provided by the Government in its latest report, action has been taken with a view to preventing delays in the payment of social security contributions in combination with an unprecedented reform to improve the operation of the labour justice system. The Government nevertheless indicates that the education system is prone to disputes relating to the problem of the payment of certain components of wages, and particularly special subsidies, in view of the complexity of the structure of remuneration, which complicates the determination of arrears, and that these issues are the responsibility of the Court of Accounts (Contraloría General) and the directorate of labour, which have had to resolve these disputes in an appropriate manner. The Government adds, with regard to the special problem of teachers employed by municipal authorities, that the Basic Act on the municipal sector has been amended to provide for adequate penalties against the mayors of municipal authorities who do not comply with their obligations, including the payment of the social contributions owed in respect of their employees. The legislation henceforth includes the dissuasive concept of “significant failure to discharge a duty”, which may lead to the removal from office of those responsible and the prohibition on their holding public office in the future. Finally, the 2008 reform of the social insurance system has reinforced the responsibility of mayors and other competent authorities in relation to the payment of social contributions.

The Committee takes due note of this information and invites the Government to describe the manner in which the new legislation is applied in practice, including with an indication of the number of inspections carried out, particularly by the labour directorate and the Court of Accounts, with a view to ensuring the payment by municipal authorities of the education subsidy; the number and nature of the violations reported; and the number and nature of the penalties imposed. The Government is also requested to indicate whether the situation of the arrears in the case of municipal authorities has been resolved and to indicate any amounts that remain unpaid; the number of municipal authorities that are still in arrears in the payment of the education subsidy, the amounts involved and the number of workers affected; as well as the amounts of the reimbursements made.

3. Representation made by the College of Teachers of Chile AG. On 9 November 2009, the College of Teachers of Chile AG, under article 24 of the ILO Constitution, presented a representation alleging non-observance by Chile of Convention No. 35 and Convention No. 37. At its 308th Session (June 2010), the ILO Governing Body found this representation receivable and decided “to postpone the appointment of the Committee to examine the representation pending the examination of the case by the Committee of Experts at its next session, in November–December 2010”. The Governing Body also decided “to transmit the information provided by the complainant to the Committee of Experts with a view to the examination of this issue in the context of the follow-up given to the recommendations previously adopted by the Governing Body on similar matters, as envisaged by Article 3, paragraph 3, of the Standing Orders concerning the procedure for the examination of representations”.

The Committee notes the mandate assigned by the Governing Body in conformity with article 3, paragraph 3, of the Standing Orders concerning the procedure for the examination of representations. In accordance with this provision, “if a representation which the Governing Body decides is receivable relates to facts and allegations similar to those which have been the subject of an earlier representation, the appointment of the committee charged with examining the new representation may be postponed pending the examination by the Committee of Experts on the Application of Conventions and Recommendations of the follow-up given to the recommendations previously adopted by the Governing Body”. The recommendations of the Governing Body in respect of the previous representations presented by the College of Teachers regarding similar facts and allegations were adopted in 1999 and 2007 and the follow-up given is examined under point 2 above.

The 2009 representation procedure led the Committee to suspend its examination under article 22 of the ILO Constitution of the issues related to this representation, pending a decision by the Governing Body on this matter. The Committee recalls that it had treated these matters in its observations of 2008 and 2009 based on the information supplied by the College of Teachers A.G. of Chile and the Government and also on the information emanating from the discussion in 2009 by the Conference Committee on the Application of Standards of the implementation by Chile of Convention No. 35.

The Committee notes that the College of Teachers of Chile AG indicates that in 1980 Legislative Decree No. 3.551 issuing standards respecting remuneration in the public sector established, as from 1 January 1981, a special untaxed subsidy for teachers under the authority of the Ministry of Public Education. Calculated as a pro rata of the basic wage, this subsidy amounted to 90 per cent of the wage for graduate teachers and 50 per cent for non-titularized teachers. In 1982, a law transferred to the municipal authorities teachers who had previously been under the responsibility of the Ministry of Public Education, while placing them under the remuneration system of the private sector. This transfer resulted in the ending of the payment of the subsidy. The College of Teachers asserts that the non-payment of this component of their remuneration is at the origins of a “historic debt” of the State in relation to teachers. Furthermore, according to the College of Teachers of Chile AG, as social security contributions represent a percentage of gross remuneration and are paid by the employer to the competent social security bodies, the ending of the payment of the special subsidy also resulted in a decrease in the contributions of the employers to their capital accumulation retirement accounts and therefore a decrease in the amount of the pensions of around 80,000 teachers, in violation of the general principles set out in Conventions Nos 35 and 37, ratified by Chile.

According to the information supplied by the Government in its reports under article 22 of the ILO Constitution in 2009 and 2010, the special subsidy established by Legislative Decree No. 3.551 of 1980 constitutes a non-taxable supplement to remuneration paid only to public employees not subject to old-age and invalidity contributions. The Government adds that all teachers were transferred to the private remuneration system by Act No. 18.196 of 1982, which explicitly provides that the legislative texts governing the public sector remuneration system, including Legislative Decree No. 3.551 of 1980, shall no longer be applicable to the persons concerned. The Government also indicates that since 1991 the conditions of service of teachers employed by municipal authorities have been governed by Act No. 19.070, which does not provide for the maintenance of the subsidy referred to above, and that the Supreme Court has found that the fact that agreements may in certain cases have been concluded for the maintenance of the previous remuneration system cannot be considered as legitimately applying to employment contracts concluded following the adoption of Act No. 18.196, which prohibits such agreements. Furthermore, the Court of Accounts (Contraloría General de la República) has considered that, although certain teachers transferred to the municipal authorities may have continued to receive a wage supplement of a nature similar to the special subsidy established by Legislative Decree No. 3.551, this amount was the result of an agreement concluded by the latter with the municipal authorities employing them. It accordingly considers that there is no “historic debt” in relation to those teachers, but that it consists of a political claim by the latter.

The Committee notes that the new representation made by the College of Teachers of Chile AG bears similarities with the two previous representations since all three cases concern allegations relating to the non-payment of social contributions with an impact on the level of the teachers’ old-age and invalidity pensions. The Committee notes that the first two representations concerned the non-observance by the competent authorities of the legal provision of the national legislation, and that the existence at the national level of a legal basis regarding the entitlement of teachers to the payment of arrears of social contributions was clearly established. However, the new representation made in 2009 by the College of Teachers raises the question of whether there exists in national law a legal basis establishing the entitlement of teachers to maintain a benefit derived from the conditions of service of public employees, which no longer applied to them due to their transfer under different conditions of service.

The Committee observes, therefore, that the status of teachers, in the context of the 2009 representation, raises new questions governed by contested domestic law. The Committee notes that although the new representation concerns allegations similar to those raised by the 1999 and 2007 representations, the legal facts on which the 2009 representation is based are different from these earlier representations.  Accordingly, the Committee, replying to the mandate assigned by the Governing Body, concludes that the follow-up to the recommendations adopted previously by the Governing Body are not relevant in the context of the examination of the 2009 representation.

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1. Follow-up to the conclusions and recommendations of the Committee set up to examine the representation made by Chilean unions of employees of pension fund administrators (AFPs) under article 24 of the ILO Constitution. In its previous observation, the Committee requested the Government to reply to the 98th Session of the International Labour Conference and to provide a detailed report in 2009 on the implementation of the recommendations adopted by the Governing Body in March 2000 concerning the above representation (Governing Body, 277th Session, March 2000 (GB.277/17/5, March 2000)). The recommendations were as follows: (i) that the pension system established in 1980 by Legislative Decree No. 3.500, as amended, should be administered by non‑profit-making organizations; (ii) that representatives of the insured should participate in the administration of the system under conditions determined by national law and practice; and (iii) that employers should contribute to the financing of the insurance system. The Committee notes that, following the discussion of the Chile case at the Conference in June 2009, the Conference Committee noted that the 2008 reform creating a pillar based on solidarity had not resulted in any major changes to the private pension system established by Legislative Decree No. 3.500 of 1980. Concerned at the gravity of the financial situation of the private system, the Conference Committee urged the Government to provide a detailed report on the measures taken to ensure the viability of the system, if necessary with technical assistance from the ILO.

The Committee is bound to deplore the fact that despite the promises made by the Government representative and the express request of the Conference, no information on these issues has been provided by the Government for examination. In effect, the Government considered it appropriate to reply only to the observations made by the College of Teachers of Chile AG concerning the “historic debt” of social security. The Committee expresses concern at the Government’s determination to ignore, since 2000, the recommendations made to it by the international community and the numerous calls for dialogue by the Committee and urges the Government to reconsider its position.

The Committee has decided to examine the national situation based on the information provided orally by the Government representative at the Conference and on Act No. 20.255 of 2008 on the reform of the pension system.

(i) Administration by institutions not conducted with a view to profit (Article 10, paragraph 1, of the Convention) According to the information provided by the Government representative at the Conference, the 2008 structural reform has supplemented the individual capital accumulation social insurance system, which was established in Chile in 1981, with a new universal social insurance scheme based on solidarity which supplements the benefits insured by AFPs where these are minimal. The new scheme is designed to protect those who do not qualify for a pension. The old-age protection system has therefore been transformed into a mixed system administered by the Institute for Labour Security (ISL), the Institute for Social Provision (IPS), pension fund administrators (AFPs) and unemployment fund administrators (AFCs). The ISL and IPS are public entities, while AFPs and AFCs are, according to the statement made by the Government representative, “private non-profit-making entities”. The Committee would be grateful if the Government would explain how AFPs, which are established under the legal form of limited liability companies allowing profit-making activities, have been converted into “private non-profit-making entities” considering that all its previous reports have always presented these entities as private companies which, by definition, are profit-making institutions. The Committee notes that the general logic of the Chilean mixed pension system remains focused on individual saving capacity, since persons in a position to save are obliged by law to join an AFP. In this regard, the reform has not only maintained AFPs as the principal mechanism of old-age protection, but has also strengthened their position given that if their private management generates derisory pensions they will be supplemented by a complimentary old-age pension (APS) financed by national solidarity and paid to persons whose pensions do not reach a minimum threshold. The Committee also notes that Act No. 20.255 assigns new functions to the Superintendence of Pensions (SUPEN), which was previously responsible for supervising AFPs (private companies) and is now also responsible for supervising the IPS, which is a public body administering the solidarity system. The Committee would be grateful if the Government would explain the reasons for making private profit-making institutions and public non-profit-making bodies subject to the supervision of the same body – SUPEN.

(ii) Participation of the insured persons in the administration of the system (Article 10, paragraph 4, of the Convention). With regard to the recommendation that the representatives of the insured persons should participate in the administration of the old-age protection system, the Committee notes the indication of the Government representative at the Conference that, since the reform of the social insurance system in 2008, users have participated in the evaluation of the system, the monitoring of its operation and the formulation of policy proposals aimed at strengthening its development. The new system includes a Board of Pension System Users responsible for evaluating the operation of the pension system and proposing strategies. However, although representatives of workers and retired workers are included on this Board, which constitutes notable progress in terms of social dialogue, the Board has only advisory functions and may not participate in the administration of the pension system. Act No. 20.255 also established a Technical Investments Council to study the investments made by AFPs for the purposes of enhanced profitability and security. Even though this Council exerts considerable influence with regard to the investment of pension funds administered by AFPs, the Committee notes that there is no participation of representatives of the insured persons. Moreover, the lack of control over investments by insured persons may lead to high-risk investments and therefore potential losses. According to the indications given by the Worker members, the financial crisis has resulted in losses of between 30 and 40 per cent of the total of individual accounts administered by AFPs, equivalent to 7–14 years’ contributions. This led the Conference to express fears concerning the viability and sustainability of the system. In these circumstances, the Committee is bound to observe that the exclusion of the representatives of the protected persons (active workers and retired workers) from participation in the administration of AFPs and the Technical Investments Council is contrary to the right of the insured persons to participate in the administration of insurance system financed by their contributions, in accordance with Article 10 of the Convention.

(iii) Contribution of employers to the financing of pensions (Article 9 of the Convention). Following the adoption of Legislative Decree No. 3.500 in 1980, payments made into individual capital accumulation accounts were payable in full by the insured persons. The 2008 reform has not altered the method of compulsory financing of old-age benefits administered by AFPs. The Committee notes, however, that this reform has authorized the establishment of “collective pension funds” allowing employers to make voluntary contributions equivalent to those paid by the insured persons, a measure the implementation of which is dependent on the existence of a high level of collective bargaining. According to the Government representative’s indication at the Conference, following the 2008 reform, employers now contribute to the social insurance system by financing contributions to fund the survivors’ insurance scheme set out in section 59 of Legislative Decree No. 3.500 of 1980. The Committee requests the Government to provide information on any other initiative designed to ensure the financial participation of employers in the social insurance system.

2. Follow-up to the conclusions and recommendations of the Committee set up to examine the representation made by the College of Teachers of Chile AG under article 24 of the ILO Constitution. The Committee notes the information provided orally by the Government representative to the Conference Committee concerning the implementation of the recommendations adopted by the Governing Body in 2007 following the report of the Committee set up to examine the representation made by the College of Teachers of Chile AG under article 24 of the ILO Constitution (see document GB.298/15/6), alleging non-observance by Chile of Conventions Nos 35 and 37 in relation to the problem of the social security arrears arising from non-payment of the further training allowance. The Government representative indicated that the system for controlling public subsidies has been strengthened, both in terms of public municipal education and private education. Since March 2008, Chile has gradually been implementing a major reform of its labour tribunals which has significantly shortened the duration of cases and ensured access to free legal assistance. The General Inspectorate and the Labour Directorate also need to find appropriate solutions to determine the amounts of the arrears. In this regard, the Organic Municipal Act has been amended and now provides for heaver penalties including the removal from office of mayors not fulfilling their obligations, in particular the obligation to pay old-age contributions. The Committee would be grateful if the Government would explain in its next report, with the support of figures, how these measures have contributed to resolving the problem of contribution arrears in accordance with the 2007 recommendations of the Governing Body.

3. Historic debt. With regard to the issue of the “historic debt” of social security resulting from the failure to take into account part of the remuneration of nearly 80,000 teachers for the purposes of calculating the right to a pension, the Committee notes the statement made by the Government representative to the Conference Committee that this was a political demand without legal basis made by workers in the education sector for a special allowance that they had been granted on a non-taxable basis to be taken into account for the purposes of pension rights. This position has been confirmed by the Government in its reply of 5 November 2009 to the allegations made by the College of Teachers. Recognizing the efforts made by democratic Governments to improve the social security system and ensure old-age protection for the most vulnerable categories of society, the worker members indicated that they continued to hope that the Government would give effect to the recommendations made by the Governing Body to reform the structural problems in the administration of the private pension system, resolve the problem of arrears in the payment of social security contributions and solve the issue of “historic debt”. In its conclusions, the Conference Committee recalled that the problems relating to the application of the Convention date back several years without effective solutions being found by the Government. It therefore urged the Government to transmit legal and technical information to allow the Committee of Experts to examine together with the detailed report requested from the Government on the application of the Convention.

The Committee also notes the communications of the College of Teachers of Chile AG, received in July, September and October 2009, concerning the developments relating to the issue of “historic debt”. It notes, in particular, the unanimous adoption, in August 2009, by the Special Commission established to that end by the Chamber of Deputies of financial proposals designed to resolve the situation. In November 2009, the Government’s refusal to acknowledge the “historic debt” prompted a national strike by teachers and internal political conflict. The situation is complicated further by the fact that the report of the Parliamentary Committee considers not only the legal aspects of the problem, but also mentions the State’s moral obligation towards teachers. The Committee was informed that, on 9 November 2009, the College of Teachers of Chile AG submitted to the International Labour Office a representation under article 24 of the Constitution alleging non-observance by Chile of the obligations arising under Conventions Nos 35 and 37. In view of this situation, the Committee is bound to postpone consideration of this matter to its next session pending the examination of the representation concerned by the Governing Body.

[The Government is asked to report in detail in 2010.]

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Follow-up to the conclusions and recommendations of the committee set up to examine the representation made by Chilean unions of employees of pension fund administrators (AFPs), under article 24 of the Constitution. The Committee notes that the Government’s report does not refer to measures taken in order to guarantee the observance of the main recommendations of the committee set up to examine the representation made by a number of Chilean unions of employees of AFPs, under article 24 of the Constitution, concerning non-observance by Chile of Convention No. 35, adopted by the Governing Body at its 277th Session in March 2000 (GB.277/17/5, March 2000). The following were the recommendations: (i) the pension system established by Decree Law No. 3.500 of 1980, as amended, should be administered by non-profit-making organizations; (ii) representatives of the insured should participate in the administration of the system under conditions determined by national law and practice; and (iii) employers should contribute to the resources of the insurance scheme. The Committee notes nevertheless that a special session of the Senate has been convened in December 2008 in order to get a clear overview of the impact of the global financial and economic crisis on the private pension funds, which have sustained important financial losses. In this situation, the Committee trusts that the Government will supply in its next report detailed information on the measures taken to save the national pension system in the light of the recommendations of the Governing Body and in conformity with the provisions of the Convention.

Follow-up to the conclusions and recommendations of the committee set up to examine the representation made by the College of Teachers of Chile AG under article 24 of the Constitution. The Committee notes that the Government’s report contains no reply to its previous observation which concerned the recommendations of the committee set up to examine the representation made by the College of Teachers of Chile AG under article 24 of the Constitution for non-observance by Chile of Conventions Nos 35 and 37, adopted by the Governing Body of the ILO in March 2007 at its 298th Session (GB.298/15/6, March 2007). The following were the recommendations: (a) to take all the necessary measures to solve the problem of the social security arrears arising from non-payment of the further training allowance; (b) to continue and strengthen the supervision of the actual payment of the further training allowance by employers in arrears; and (c) to ensure the effective application of deterrent sanctions in the event of the non-payment of the further training allowance. The Committee expects the next report of the Government to contain full information on the effect given to these recommendations. The Government has also not responded to the communication of the College of Teachers of Chile AG received in July 2007 relating to the so-called “historic debt” of social security (deuda historica) generated as a result of the non-payment of the full wages in conformity with Decree Law No. 3.551 of 1981 to nearly 80,000 teachers. The teachers have been deprived of their rightful salary which has consequently affected their social security entitlements since 1981, causing a significant deterioration of their right to a fair pension. In this respect, the Committee notes from the public web site of the Chilean Parliament that a special committee was set up within the national Parliament in November 2008 with the participation of the College of Teachers of Chile AG and other interested parties in order to examine the situation of historical debts. The latter is due to submit its proposals to address the accumulated social security arrears in May 2009 and the Government is to communicate its reply within 60 days. The Committee asks the Government to indicate the results of these deliberations in its next report and to reply in detail on other issues raised by the College of Teachers of Chile AG.

Please also respond to the observations made in January 2008 by the Circle of Retired Police Officers alleging the loss of acquired rights related to old-age pension (quinquenio penitenciario) by penitentiary staff.

In view of the accumulating grievances which do not find adequate response from the Government, the Committee once again urges the Government to re-examine all the issues involved, with the technical assistance of the Office, if need be, and to provide detailed information on the measures taken to redress the situation.

[The Government is asked to supply full particulars to the Conference at its 98th Session and to reply in detail to the present comments in 2009.]

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I. 1. The Committee notes the conclusions and recommendations of the committee set up to examine the representation made by the College of Teachers of Chile AG under article 24 of the Constitution alleging non-observance by Chile of, inter alia, Convention No. 35 (GB.298/15/6, 298th Session, March 2007).

In its conclusions (paragraphs 45 to 53 of the report), the above committee noted the measures adopted by the Government to resolve the problem of the social security arrears, which was the subject of the representation, arising from the non-payment of the further training allowance by municipal employers to the teachers entitled to it. With regard to the over 140 municipalities that had failed to pay the further training allowance or to sign agreements on the subject, the committee set up to examine the representation noted the information provided by the Government on the measures adopted, including legislative measures, with the main intention of authorizing advance payments from the Common Municipal Fund in order to facilitate a solution to the problem affecting a number of municipalities that were still in arrears with the payment of further training allowances for teachers in the education services covered by Legislative Decree No. 1 of 1996 on the Teachers’ Statute, issued by the Ministry of Education. In relation to the agreements signed to resolve the problem of arrears, the Committee set up to examine the representation noted with interest the Protocol Agreement adopted by the complainant organization and the Government in December 2003 to: “… evaluate the current system of further training with a view to revising the current further training allowance as from 2006”. The committee set up to examine the representation considered that, in the event of non-compliance, the Ministry of Education should institute administrative proceedings and apply the penalties prescribed by law. It also trusted that the Government would provide it with detailed information on the manner in which supervision is carried out in practice, as well as the penalties that may have been applied to municipalities that have failed to pay the further training allowance and, in that case, on the measures taken to compensate the damages caused.

Finally, in its conclusions, the committee set up to examine the representation considered that the Committee of Experts should continue to follow up the matters raised in its report. The Committee of Experts notes the above and endorses the conclusions of the committee set up to examine the representation. The Committee of Experts hopes that the Government will give effect to the recommendations made by the committee set up to examine the representation, and it urges the Government to: (a) take all the necessary measures to solve the problem of the social security arrears arising from non-payment of the further training allowance; (b) continue and strengthen the supervision of the actual payment of the further training allowance by employers in arrears; and (c) ensure the effective application of deterrent sanctions in the event of the non-payment of the further training allowance.

The Committee of Experts invites the Government to submit a report under article 22 of the ILO Constitution on the application of Conventions Nos 35 and 37 containing detailed information on all the measures adopted or envisaged to secure the effective payment of subsidies, including the further training allowance, by all the municipalities, and on the manner in which the situation has evolved as a result of these measures, indicating in particular: (a) the number of inspections carried out, in particular by the Ministry of Education, to verify payment of the further training allowance by the municipalities; the number and nature of the violations reported and the number and nature of the penalties imposed; (b) the number of municipalities remaining in arrears with regard to the payment of the further training allowance; (c) the amount of such arrears and the number of workers affected; (d) the amount of arrears settled; (e) the outcome of the legislative procedure concerning the bill aimed at resolving the problem of social security arrears and, once the bill has been adopted; (f) information on its implementation, including the number of municipalities requesting advances to enable them to pay the further training allowance; and (g) any agreement concluded with the aim of solving the problem of arrears.

2. The Committee also notes the communication dated 18 July 2007, also made by the College of Teachers of Chile A.G., referring, in the same way as the above representation, to the problem of social security arrears arising from the non-payment of the further training allowance by municipal employers to teachers. This communication was forwarded to the Government on 5 September 2007.

II. 1. With reference to its previous comments, the Committee notes the Government’s indication that the legislation governing the pension system based on individual capital accumulation has not been amended in a manner which affects the application of the Convention. The system of pensions based on capital accumulation does not make distinctions between contributors on the basis of the type of work performed in the case of industrial or agricultural work. The only workers who are covered by special provisions in relation to the amount of the contribution, its financing and pensionable ages, are those engaged in types of work classified as arduous. The requirements for entitlement to a pension, the manner of the calculation of pensions and the conditions for entitlement to the minimum benefits guaranteed by the State are the same for all workers, with the exception of those engaged in arduous types of work, who may retire at an earlier age than other workers, and who receive in their individual capital accounts, in addition to their own contributions, an additional employers’ contribution.

2. In its previous comments, the Committee noted the conclusions and recommendations of the committee set up to examine the representation made by a number of Chilean unions of employees of Pension Fund Administrators (AFPs), under article 24 of the Constitution, alleging non-observance by Chile, inter alia, of Convention No. 35 (GB.277/17/5, 277th Session, March 2000). In accordance with the conclusions contained in paragraphs 18 to 35 of the report and its previous comments, the Committee of Experts reiterated the need to adopt the measures required to ensure that:

(i) The pension system established in 1980 by Legislative Decree No. 3500 is administered by non-profit-making institutions in accordance with the provisions of Conventions Nos 35 and 36 (Article 10, paragraph 1) and Conventions Nos 37 and 38 (Article 11, paragraph 1), unless the administration is entrusted to institutions founded at the initiative of the parties concerned or of their organizations and duly approved by the public authorities, in accordance with Conventions Nos 35 and 36 (Article 10, paragraph 2) and Conventions Nos 37 and 38 (Article 11, paragraph 2).

In this respect, the Government indicates that the pensions system governed by Legislative Decree No. 3500 of 1980 is a system designed on the basis of the administration of resources by private entities. The system was designed on the basis that a commission is paid by insured persons to the above entities in exchange for the administration of their funds. In this manner, entrusting the administration of insurance funds to non-profit-making entities would be similar to a pay-as-you-go system in which public entities administer the insurance funds of contributors, but is incompatible with a system of individual capital accumulation. The Committee notes this statement. In this respect, the Committee wishes to emphasize that, irrespective of the financing technique, whether collective or individual, the systems of capitalization that are in operation in highly socially developed countries show that this incompatibility does not exist and that the funds may be managed efficiently both by public and private institutions, without them necessarily being profit-making. Reference should be made, by way of illustration, to the fact that in Chile, in the field of employment injury, many mutual benefit associations are in operation which, without being profit-making, achieve their objectives in full coordination and complementarity with the rest of the Chilean social insurance system.

(ii) Representatives of the insured persons participate in the administration of the system under conditions determined by national laws and regulations, in conformity with the provisions of Conventions Nos 35 and 36 (Article 10, paragraph 4) and Conventions Nos 37 and 38 (Article 11, paragraph 4).

In relation to this point, the Government indicates that the arguments outlined with regard to the previous point are still valid as it is necessary for the funds to be managed by entities with professional staff dedicated to that purpose. The participation of insured persons is guaranteed, in the view of the Government, by the possibility of choosing the type of fund in which compulsory and voluntary contributions are to be deposited and by choosing the AFP which will manage the funds of insured persons. The Committee notes this statement. However, it wishes to emphasize that other countries in which systems of individual capital accumulation have also been adopted have systems of administration in which the participation of insured persons is guaranteed and which operate with a high level of specialization and efficiency. It therefore hopes that the Government will take the necessary measures, in conformity with the Convention, to give effect to the decisions of the Governing Body.

(iii) The competent services carry out and strengthen their oversight of employers and impose effective sanctions to discourage recurrences of cases of failure to pay pension contributions.

On this point, the Government indicates that Chile has strengthened the guarantees of the social insurance rights of workers through the adoption of Acts Nos 20022 and 20023, which established new tribunals covering the collection of labour and social insurance contributions, and introduced new provisions respecting the collection through the courts of social insurance contributions. This legislation has strengthened the powers of the authorities and the means of supervising employers to ensure the payment of social insurance contributions for their workers. The Committee notes the Government’s statement with interest. It requests the Government to provide information, including statistical data, on the activities of the new tribunals for the collection of labour and social insurance contributions, with an indication of the number of penalties imposed and the texts of the rulings issued by the above tribunals.

III. With regard to the other matters raised in its previous comments, the Committee observes that the Government has not provided information on the matters of principle. This being the case, the Committee hopes that the Government will adopt the necessary measures to ensure, in accordance with Article 9, paragraph 1, of the Convention, that employers contribute to the resources of the insurance scheme and, in accordance with Article 9, paragraph 4, that the public authorities contribute to the resources or to the benefits of the insurance scheme.

IV. In its previous comments, the Committee noted the information submitted by: the Directorate of the National Association of Academics of the University of Chile (A.G.); the Directorate of Act 19170 on the State Railway Company; the President of the National Association of Employees of the Directorate of Libraries, Archives and Museums (DIBAN); the Association of Professional and Technical Staff of the University of Chile (APROTEC); the Association of Public Health Employees, Western Region; the Directorate of the Federation of Associations of Employees of the University of Chile (FENAFUCH); and the Association of Public Employees for Redress for Pension-related Prejudice. In their observations, the above organizations allege that public employees who joined the individual capital accumulation pension system established by the Legislative Decree of 13 November 1980 have seen the amount of their pensions drop to one third of their real income or, at best, to under one half, upon retirement. This has given rise to a situation of inequality, since two workers of the same age with the same number of years’ service and the same monthly benefits or income may be treated differently on retirement, with one receiving a pension amounting to one third of that of the other, merely because they belong to different pension schemes. According to the above organizations, as a result, some of the pensions already paid by the AFPs are lower than the minimum monthly wage. The Committee noted these observations and recalled that, in accordance with Article 19 of the Convention, the rate of the pension shall be an amount which, together with any means of the claimant in excess of the means exempted, is at least sufficient to cover the essential needs of the pensioner.

The Government indicates in this respect that those workers who joined the pension system based on individual capital accumulation and who had previously been covered by one of the funds of the former pension system are ensured a minimum old-age pension at the age of 65 years or above for men and at the age of 60 years or above for women when they have completed at least 20 years of contribution or attributable service in any of the social insurance systems in accordance with the provisions governing the corresponding scheme. Consequently, the transfer of workers covered by the pay-as-you-go to the system of individual capital accumulation does not involve the loss of the periods of contribution in respect of the years of service for the public system, which will still be acknowledged in the form of an acknowledgement voucher for the purpose of their pension benefits under the capital accumulation system, or so that they are granted entitlement to a minimum pension if their insurance funds are not sufficient to finance one.

The Government adds that under the terms of the agreement concluded with the National Association of Public Employees (ANEF), a Bill (Boletín No. 3975-13) is being examined by the National Congress which establishes a premium of 50,000 pesos a month for workers in the public sector who are covered by an AFP who, when retiring, receive a pension that is significantly lower than the income they received previously. Furthermore, on 7 June 2007, the President of the Republic sent a Bill (Boletín No. 5173-05) to the National Congress which, inter alia, establishes a labour retirement premium for personnel covered by the private pension system and who contribute to the system in respect of their employment in the public service and have complied with the other requirements established in this respect.

The Committee notes with interest the compensatory measures adopted by the Government in respect of those public sector employees who were transferred to the individual capital accumulation insurance system established under the Legislative Decree of 13 November 1980 and who have seen the amount of their pensions reduced when taking retirement. As the above measures apply only to the public sector, the Committee hopes that the Government will examine the possibility of extending similar measures to all other insured persons.

[The Government is asked to reply in detail to the present comments in 2008.]

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1.  The Committee notes the conclusions and recommendations of the committee set up to examine the representation made by a number of Chilean unions of employees of pension fund administrators (AFPs), under article 24 of the Constitution, alleging non-observance by Chile inter alia of Convention No. 35 (document GB.277/17/5, 277th Session, March 2000). Bearing in mind the conclusions contained in paragraphs 18-25 of the report and in the observations made by the Committee of Experts, the above committee recommended the adoption of measures to ensure that:

(i)  the pension system established in 1980 by Legislative Decree No. 3500 is administered by non-profit-making institutions in accordance with the provisions of Conventions Nos. 35 and 36 (paragraph 1 of Article 10) and Conventions Nos. 37 and 38 (paragraph 1 of Article 11), unless the administration is entrusted to institutions founded on the initiative of the parties concerned or of their organizations and duly approved by the public authorities, in accordance with Conventions Nos. 35 and 36 (paragraph 2 of Article 10) and Conventions Nos. 37 and 38 (paragraph 2 of Article 11);

(ii)  representatives of the insured persons participate in the administration of the system under conditions determined by national laws and regulations, in conformity with the provisions of Conventions Nos. 35 and 36 (paragraph 4 of Article 10) and Conventions Nos. 37 and 38 (paragraph 4 of Article 11);

(iii)  the competent services carry out and strengthen their oversight of employers and impose effective sanctions to discourage recurrences of failure to pay pension contributions.

2.  The Committee observes that, in its recommendations, the committee set up to examine the representation of November 1998 confirms the observation that this Committee has been making for several years concerning Article 10, paragraphs 1, 2 (administration of the insurance) and 4 (participation of the insured persons in the management of the insurance institution), of the Convention. The Committee therefore hopes that the Government will take the necessary measures to implement the decisions of the Governing Body.

3.  With regard to the other points raised in its previous comments, the Committee notes the information supplied by the Government in its report for the period 1998-99, which it decided to postpone examining pending the Governing Body’s decisions concerning the abovementioned representation of November 1998. The Committee notes that the Government provides no information on the matters of principle raised in its previous comments. That being so, the Committee hopes that the Government will take the necessary steps to provide, in accordance with Article 9, paragraph 1, of the Convention, that employers shall contribute to the resources of the insurance scheme and, in accordance with Article 9, paragraph 4, that the public authorities shall contribute to the resources or to the benefits of the insurance scheme.

4.  With regard to the decision adopted by the Governing Body of the ILO at its 265th Session (March 1996) to invite States parties to Conventions Nos. 35, 36, 37, 38, 39 and 40 to consider the possibility of ratifying the Invalidity, Old-Age and Survivors’ Benefits Convention, 1967 (No. 128), and accordingly denouncing Conventions Nos. 35 to 40, the Committee notes that the Government fully agrees to and accepts the decision of the Governing Body concerning the denunciation of Conventions Nos. 35, 36, 37 and 38. So far, it has been unable to submit the denunciation of these instruments to the Tripartite Committee on Convention No. 144, but the Government hopes to be able to do so as soon as possible.

With regard to the possibility of ratifying the Invalidity, Old-Age and Survivors’ Benefits Convention, 1967 (No. 128), Article 44 of which provides that acceptance of the Convention ipso jure involves the denunciation of Conventions Nos. 35, 36, 37 and 38, the Committee notes that Convention No. 128 has been submitted for consideration and analysis to the technical bodies for them to determine the feasibility of its implementation in the light of existing legislation, particularly the new system of pension administration and funding, and the differences between it and Conventions Nos. 35, 36, 37 and 38. No decision has been taken because it would appear that, as regards the administration and funding of pensions, Convention No. 128 does not differ from Conventions Nos. 35, 36, 37, 38, 39 and 40, which are to be denounced. The Committee asks the Government to inform it of any decisions taken on this matter.

5.  The Committee notes the information submitted by the Directorate of the National Association of Academics of the University of Chile (AG); the Directorate of Act 19.170; Beneficiaries of the State Railway Company; the Chairman of the National Association of Employees of the Directorate of Libraries, Archives and Museums (DIBAN); the Association of Professional and Technical Staff of the University of Chile (APROTEC); the Association of Public Health Employees, Western Region; the Directorate of the Federation of Associations of Employees of the University of Chile (FENAFUCH); and the Association of Public Employees for Redress for Pension-related Injury.

In their observations the abovementioned organizations allege that, upon retiring, public employees who joined the individual capitalization pension system established by the Legislative Decree of 13 November 1980 have seen the amount of their pensions drop to one-third of their real income or, at best, to under one‑half. This has given rise to a situation of inequality, since two workers of the same age with the same number of years’ service and the same monthly pension or income may be treated differently on retirement, one receiving a pension amounting to one-third of that of the other, merely because they belong to different pension schemes. According to the above organizations, as a result some of the pensions already paid by the AFPs are lower than the minimum monthly wage. The Committee notes these observations. It recalls that, according to Article 19 of the Convention, the rate of the pension shall be an amount which, together with any means of the claimant in excess of the means exempted, is at least sufficient to cover the essential needs of the pensioner. The Committee hopes that the Government will provide relevant information on this matter.

6.  Lastly, the Committee hopes that the Government will provide the information requested in its observation of 1999.

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1. The Committee has noted the conclusions and recommendations made by the committee set up to examine the representation alleging non-observance by Chile of, inter alia, Convention No. 35, made under article 24 of the ILO Constitution by the College of Teachers of Chile, AG (document GB.273/16/4, 274th Session, March 1999).

The allegations presented in the representation by the complainant organization relate to the failure to pay the social security contributions of teachers and the consequent responsibility on the public authorities. The Government did not refute the content of its international obligations and supplied detailed information on the institutional framework and the verification and supervisory measures exercised by the authority of the State. The Government also supplied information on some corrective measures designed to settle the arrears in payment of contributions. In its conclusions, the committee set up to examine the representation considered that, although the steps taken by the Government have improved the situation to some extent, further measures are necessary in order to ensure that the relevant Conventions are fully applied in practice. In particular, it recommended that the competent services carry out their tasks and strengthen their supervisory activities and that appropriate penalties be strictly applied so as to prevent the situation of arrears in contributions from recurring in future, and urged the Government to continue to ensure that the outstanding social security arrears, the scale of which should not be underestimated, are settled in full. The said committee also urged the Government to take all the necessary measures to ensure that the social security rights of teachers are restored; to continue and strengthen the supervision of the effective payment of social security contributions by the municipalities; and to ensure the effective application of deterrent penalties in the event of non-payment of social security contributions. The Committee also requested the Government to supply, inter alia, detailed information on the number of checks carried out, in particular by the Ministry of Education, to verify payment of social security contributions by the municipalities; the number and nature of violations registered and the number and nature of the penalties imposed; the number of municipalities remaining in arrears with regard to their payment of social security contributions, and the amount of such arrears; the number of workers affected and the amount of arrears settled.

The Committee of Experts notes the information supplied by the Government in September 1999 in response to the said conclusions and recommendations as well as the information which the College of Teachers communicated in October 1999 in connection with the representation.

In its report on the measures adopted to ensure effective payment of social security contributions for teachers, the Government refers to measures such as verification and supervision of payment of social security contributions along with government action and legislative measures to settle the amount owed by certain municipalities.

In regard to the verification and supervision of payment of social security contributions in respect of teachers, the Government indicates that it has adopted special inspection measures to be carried out by the supervisory bodies with competence in the matter which are: (a) the Ministry of Education, which has been authorized to retain from subsidies the amount of the social security contributions in respect of teachers which have not been paid into the social security institutions; (b) the Directorate of Labour, whose inspectors are empowered to impose the fines which sanction failure to comply with the obligation entailed in declaring and paying the remuneration and income of workers. The social security contributions duly declared in the AFPs and not paid, as is the case for most of the social security arrears incurred by the municipal corporations, can be covered by judicial methods, which lie within the exclusive competence of each AFP. With respect specifically to the municipal corporations, the Directorate of Labour carries out the following types of action: (i) it publishes in the bulletin of breaches of labour and social security legislation the list, supplied by the social security institution itself, of the municipal corporations which are in arrears of payment of social security contributions; in July 1999, these arrears amounted to 2,098,712,464 pesos; (ii) it carries out inspection measures at the request of concerned individuals or institutions. Among the administrative fines imposed are fines on municipalities in respect of social security matters which amount to a total of 966,918 pesos, imposed on 23 municipalities in the country; (iii) in two consecutive years, it has conducted special verification programmes in municipal schools. The information on the programme for 1998 allowed to review the social security situation in 75 schools with a total of 2,924 workers to be revised. No violations were recorded. (c) Administradoras de Fondos de Pensiones (companies administering pension funds) which, according to section 19 of Legislative Decree No. 3500 of 1980, are obliged to pursue legal action designed to recover the social security contributions in arrears in respect of their members. The superintendency of companies administering pension funds has specially instructed the AFPs in regard to recovery of unpaid social security contributions by means of three circulars (Nos. 336, 347 and 551) which relate to judicial recovery, the information procedure for employers who have not paid contributions to the AFPs and the records to supervise and maintain the information up to date respectively.

In regard to the total amount of social security arrears owed by the municipalities, the Government indicates that there has been a considerable decrease. At 20 April 1998, the total debt amounted to 7,534,544,602 pesos and involved 38 municipalities. In July 1999, 29 municipalities still had social security arrears in an amount of 5,791.8 million pesos, distributed among the following institutions: companies administering pension funds (AFPs), 3,261.6 million pesos; health provident institutions (Isapres), 394.3 million pesos; Welfare Administration Institute (INP), 1,951 million pesos; mutual societies or workers' welfare institutions, 148.9 million pesos. Under Act No. 19609 which allows money from the common municipal fund to be advanced to municipalities which have accrued social security arrears at 31 July 1998, an agreement to pay was to be signed with the municipalities of Quilpue, Villa Alemana, Lampa, Quinta Normal, Lota, San Clemente, Curacautín and Chimbarongo. The sum to be paid amounts to 4,300 million pesos updated at September 1999: 2,500 million pesos to the AFPs with resources provided under said Act and 1,800 million pesos in judicial transactions with the INP, set out in an agreement concluded with that institution. With this, the global figure at July 1999 of 5,791.9 million pesos would be reduced to 3,252 million pesos. Nevertheless, the search for alternatives permitting this situation to be settled definitively will continue.

With respect to the legislative measures adopted to solve the matter of social security contributions in arrears, the Government approved Act No. 19609 of 2 June 1999 which allowed the amount of 3,500 million pesos to be advanced to the municipalities which had social security arrears in respect of teachers. To this end, a period of 120 days was granted for the municipalities to conclude an agreement for advance of the amount required with the Ministry of Education or the Ministry of Health as appropriate. With reference to the case of subsidized educational establishments, the Act empowers the Ministry of Education to retain from the resources or subsidies due to the establishments an amount equivalent to the social security contributions of teaching staff that they should have paid and which are in arrears. Another legislative measure designed to safeguard the workers' social security rights is the approval and promulgation of a Bill under which the labour relations of a worker are maintained in force from the time of his dismissal for as long as the social security contributions in arrears have not been paid to the appropriate institutions. The Labour Code is thus amended to specify that if the social security contributions have not been paid at the time of dismissal, the dismissal will not result in putting an end to the labour contract and the contractual obligations of the parties shall remain in place.

The College of Teachers of Chile, AG indicates for its part that the teachers' trade union, contrary to the statement in paragraph 21 of the report on the representation, had never requested the Ministry of Education to lift the sanction involving suspension of payment of the educational subsidy to those bodies which did not pay the remuneration and contributions of its staff on time. With reference to paragraph 23 of the report, it indicates that according to information submitted in November and December 1998 by the sub-secretary of Regional Development and Administration to the Chamber of Deputies of Chile, more than 104 municipalities out of a total of 350 (namely 29.7 per cent) had social security arrears in the order of $23,442,000 and that this had increased by 7.39 per cent as compared with the previous report of the Government. The College of Teachers of Chile, AG declares its concern at the inadequacy of resources which must be provided under Act No. 19609 of 2 June 1999 to settling the problem of social security arrears; resources which amount to 3,500 million pesos. This mechanism is the only one envisaged to settle total accumulated social security arrears as at June 1999. Furthermore, section 7 of the Act provides special criminal sanctions or retention of the educational subsidy (in accordance with the Act on subsidies) for future arrears which might occur from July 1999 in this respect. The College of Teachers is of the view that the Act suppresses the possibility of penalizing the social security arrears accumulated during the 1980s and to June 1999 through the reduction of subsidies, or qualifying it as an offence of misappropriation of public funds in accordance with section 233 of the Chilean Penal Code. The teachers who depend on the municipal sector are subjected to the will of the municipalities to conclude agreements to settle this long-standing debt or the exercise of the inspection facilities of the social security superintendency and the AFPs to press the social security institutions to initiate and follow up judgements to pay prescribed by the Act, which has not occurred up to the present.

The Committee notes the special supervisory measures being carried out by the supervisory bodies such as the Ministry of Education and the Directorate of Labour. It notes in particular with interest the actions such as publication in the bulletin of offenders against labour and social security legislation of the list of corporations in arrears, the administrative fines imposed on municipalities in regard to social security and the special supervisory programmes for municipally run schools. The Committee requests the Government to provide information on the penalties which could be applied to municipalities which have not paid the social security contributions and on the results of any cases brought against such municipalities. It also takes note of the information relating to the amount of the social security arrears of the municipalities as well as on the number of municipalities that have social security arrears. It observes discrepancies between this information and the information provided by the College of Teachers of Chile, AG. It requests the Government to supply its comments on the discrepancy observed and to provide precise statistical information on the number of workers affected by the unpaid remuneration and contributions. The Committee notes the legislative measures adopted to settle the arrears in social security contributions. It notes with interest the amount of 3,500 million pesos which the Government has approved pursuant to Act No. 19609 of 2 June 1999 and the Bill under which the labour relationship of a worker is maintained at the time of his dismissal for as long as the social security contributions in arrears have not been paid to the relevant institutions. It requests the Government to provide information on the application of Act No. 19609, including on the number of municipalities which wish to take advantage of funds advanced in order to settle teachers' individual accounts.

2. The Committee notes the comments received on 20 October 1998 from the Unitary Occupational Front of Pensioners and Survivors of Chile (Region V) alleging that the adjustment of the pensions provided under the former system of redistribution of pensions is not sufficient in regard to the international standards ratified by Chile. The Committee also notes the Government's reply to these comments.

In its communication, the Occupational Front states that in the past 25 years the pensions dependent on the redistribution scheme have undergone serious deterioration and the Front refers to the facts that have produced this. According to the Front, pensions have deteriorated during two periods: the first stretched from 29 September 1973 to 10 May 1990 and the second from 11 May 1990 to 31 August 1998. In the first of them, it refers to a series of suspensions of the adjustment of pensions applied under legislative decrees. In the second, it refers to adjustments carried out at various periods, and to sectors excluded from such adjustments. Reference is also made to increments made to minimum and basic pensions.

The Government, for its part, supplies information to the effect that it is not possible to affirm that the system of updating or adjusting pensions provided under the former system of pensions is not sufficient in relation to the international standards ratified by Chile. On this matter, it indicates that the standards on the reassessment of pensions under Act No. 15386 of 1963 ceased to be applicable when they were replaced by an automatic adjustment system established in section 14 of Legislative Decree No. 2448 and section 2 of Legislative Decree No. 2547, both of 1979. In addition, pursuant to Legislative Decree No. 2444 of the same year, all the pensions that began before 1 September 1975 were specially readjusted so that from September 1978, they thus recovered their initial purchasing power. Since then, adjustments made to pensions have been equivalent to 100 per cent of the variation shown on the Consumer Price Index (CPI) during the corresponding period, with the sole exception of May 1985 when the adjustment granted was lower by 10.6 per cent than the CPI variation for the period from November 1984 to April 1985, and also in March 1987 and April 1988, when the adjustments applied to pensions at the highest rate were also less than the CPI variation. Pursuant to Act No. 18987, in July 1990, in conjunction with the automatic adjustment applied in accordance with section 14 of Legislative Decree No. 2448 of 1979, minimum pensions were adjusted by 10.6 additional points. Then, as provided in Act No. 19073, an adjustment of 10.6 per cent was applied to all pensions mentioned in section 3, as from 1 July 1999, stipulating different dates according to the amount of the pensions. In this way, since December 1992, pensions of the former system have recovered their initial purchasing power by maintaining in the present adjustment system compensation for the effects on them produced by inflation; it should also be noted that special adjustments have been granted to the lowest pensions designed to increase their amounts in real terms.

The Committee notes this information. In order to appreciate whether, in conformity with Article 19 of the Convention, adjustments to pensions are at least sufficient to cover the essential needs of the pensioner, the Committee requests the Government to supply statistical information in respect of the same period of time on the evolution of the cost of living and the evolution of benefits, including the amount of minimum pensions.

3. In regard to matters of principle, as indicated in its previous observation, in conformity with usual practice, the Committee decided to postpone its examination of the application of Conventions Nos. 35, 36, 37 and 38 pending the decisions to be adopted by the Governing Body in respect of the representation made in November 1998, under article 24 of the ILO Constitution, by various national unions of workers of pension fund administration companies. The Committee will therefore examine the information supplied by the Government in its report relating to the period 1998-99 in the light of the decisions adopted in due course by the Governing Body in the framework of said representation.

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The Committee notes the information provided by the Government in its latest report in reply to its previous comments. It notes in particular that the Government is examining, in accordance with the decision of the Governing Body at its 265th Session (March 1996), the possibility of ratifying Convention No. 128, which will result in the denunciation of Conventions Nos. 35 to 38. For this purpose, it has undertaken technical studies and analyses in order to determine whether Convention No. 128 can be applied, taking into account the current legislation, and particularly the system for the management and financing of pensions adopted in 1980, as well as the differences between Convention No. 128 and Conventions Nos. 35, 36, 37 and 38.

Furthermore, the Committee notes that at its 271st Session (March 1998), the Governing Body set up a committee to examine the representation made under article 24 of the Constitution by the College of Teachers of Chile A.G. alleging non-observance by Chile of Conventions Nos. 35 and 37. Moreover, at its most recent session (273rd, November 1998), the Governing Body declared receivable the representation made under article 24 of the Constitution by a number of national trade unions of workers of private sector pension funds concerning the system for the private administration of pensions and alleging non-observance by Chile of Conventions Nos. 35, 36, 37 and 38.

In accordance with its usual practice, the Committee has decided to suspend its examination of the application of these Conventions while awaiting the decisions of the Governing Body.

The Committee also notes the observations received on 20 October 1998 from the Unitary Occupational Front of Pensioners and Survivors of Chile (Region V) alleging that the adjustment of the pensions provided under the former system of the redistribution of pensions is not sufficient taking into account the international standards ratified by Chile. These observations were transmitted to the Government on 11 November 1998. The Committee has decided to postpone its examination of this question until its next session so that it can examine these observations in the light of any additional information that the Government may be able to provide in this respect.

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Article 9, paragraph 1, of the Convention (employers' contribution to the financial sources of the insurance scheme); Article 9, paragraph 4 (contribution of the public authorities to the financial resources or benefits of the insurance scheme); Article 10, paragraphs 1 and 2 (administration of the insurance scheme); Article 10, paragraph 4 (participation of the assured persons in the administration of insurance institutions). The Committee notes the information supplied by the Government in its report for the period from July 1994 to June 1996, and the discussion on the application of the Convention which took place in the Conference Committee in June 1995. The Committee notes that the questions it raised in earlier observations following the adoption in 1980 of the new pensions system established in Legislative Decree No. 3550 (as amended) are still pending.

The Committee notes that a Government representative informed the Conference Committee that a consultation process would be initiated in the tripartite committee established in accordance with Convention No. 144 in order to adopt, with regard to Conventions Nos. 35, 36, 37 and 38, the necessary decisions to resolve the problems raised by the supervisory bodies.

The Committee recalls that the ILO Governing Body, in a decision adopted at its 265th Session (March 1996), asked States parties to Conventions Nos. 35 to 40 to consider the possibility of ratifying the Invalidity, Old-Age and Survivors' Benefits Convention, 1967 (No. 128), and, as appropriate, to denounce Conventions Nos. 35 to 40. The Governing Body pointed out that there is a close link between proposals for the ratification of the more recent and up-to-date Conventions and proposals that certain obsolete instruments might be denounced. It also noted that the implementation of decisions on standards review policy required member States to undertake tripartite consultations taking account, in particular, of the procedures provided for in the Tripartite Consultation (International Labour Standards) Convention, 1976 (No. 144), and the Tripartite Consultations (International Labour Standards) Recommendation, 1976 (No. 152).

In these circumstances, the Committee hopes that the Government will make the necessary effort to take appropriate measures to give effect to the decision of the Governing Body so that it will be able to remedy the failure to apply Conventions No. 35 to 38.

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1. The Committee notes the information provided by the Government in its report as well as the discussion on the application of the Convention which took place in the Conference Committee in June 1993. On that occasion the Government's representative stated in particular that Convention No. 35 recognizes and regulates a former model of social security. He added that, though Convention No. 35 had not been applied in Chile since 1980, it was the will of the Government to maintain a constructive dialogue, and to supply in its future reports further information which would permit a legal analysis and proper interpretation of the standards in question by the Committee. In this connection and with reference to the comments it has been making for several years, the Committee is bound to observe that, according to the information in the Government's report, since the "new pension system" was introduced in 1980 by Legislative Decree No. 3500, as amended, the following important provisions of the Convention are still not being applied:

Article 9, paragraph 1, of the Convention (employers' contribution to the financial resources of the insurance scheme). According to the Government's explanation in its report, under sections 17, 18 and 21 of Legislative Decree No. 3500 of 1980, each worker constitutes his own pension fund with the compulsory contribution deducted monthly from his wages. As concerns the employers' contributions, on which the employers and workers may agree upon individually or collectively, in the opinion of the Government, they acquire the character of compulsory contributions in terms of contract law. In this respect, the Committee reiterates that, in the new pension scheme, the employers' contribution is no more than a possible supplementary contribution upon which the worker may agree with his employer without there being any legal obligation on the employer to bear the cost. The Committee must therefore once again express the hope that the Government will take the necessary measures to give effect to the recommendations, approved by the Governing Body, of the Committee set up to examine the representation submitted under article 24 of the Constitution of the ILO alleging non-observance by Chile of, inter alia, Convention No. 35 (see document GB.234/23/28, 234th Session, 17-21 November 1986).

Article 9, paragraph 4 (contribution of the public authorities to the financial resources or benefits of the insurance scheme). The report repeats the information provided previously on state guarantees (sections 73 et seq. of Legislative Decree No. 3500) and indicates that in 1994 the State's monthly contribution in respect of such guarantees was approximately 256 million pesos (US$600,000). According to the Government, the State's contribution cannot be regarded as conditional or exceptional; it is real and concrete, and is a specific amount which can be evaluated. The Committee notes this information. It reminds the Government that the above-mentioned Committee of the Governing Body concluded that this participation "does not strictly correspond to the contribution to the financial resources or benefits of insurance schemes" prescribed by the Convention. The Committee therefore cannot but reiterate the hope that the necessary measures will be adopted to ensure that full effect is given to this provision of the Convention.

Article 10, paragraphs 1 and 2 (administration of the insurance scheme). The Committee notes the relevant provisions of Act No. 19069 of 1991, the substance of which is reproduced in section 220 of the Labour Code (in the consolidated version of January 1994), under which the main purposes of trade unions include establishing, assisting in the establishment of, or associating with, institutions involved in the provision of pension or health insurance, whatever their legal status, and participating in them. The Government's report provides information on "Pension Fund Administration (AFP)" whose establishment has involved participation by unions or organizations of workers and associations of employers. The Government reiterates that private administration on a profit basis of the new pension system has encouraged competition between the AFPs and attracted new insured persons by better service, a better return on investment of the fund's resources and lower costs to the insured, reflected in lower commissions. While noting this information, the Committee wishes once again to draw the Government's attention to the above recommendations approved by the Governing Body to the effect that the Government should adopt appropriate measures to amend Legislative Decree No. 3500 so that the pension insurance scheme is administered by non-profit-making institutions.

Article 10, paragraph 4 (participation of insured persons in the administration of insurance institutions). The Government states in its report that Legislative Decree No. 3500 does not establish any compulsory mechanism whereby persons insured by an AFP participate in the administration and direct management of the fund, except in the case of those founded by workers or their associations. However, it does not prohibit such participation. The Committee is bound to reiterate the hope that the Government will give effect to the above-mentioned recommendations approved by the Governing Body and adopt the necessary measures to ensure that the representatives of insured persons participate in the administration of all insurance institutions under conditions to be determined by national laws or regulations, in accordance with the provisions of the Convention.

2. In view of the fact that the Committee has been asking the Government for many years to take the necessary steps to change the pension scheme regulated by Legislative Decree No. 3500 of 1980, the Committee suggests - as did the Conference Committee - that the Government consider the possibility of requesting ILO technical assistance in seeking a means of bringing national legislation and practice into full conformity with the Convention.

[The Committee is asked to report in detail in 1996.]

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The Committee notes the information supplied by the Government in its report, and of the discussions which took place at the Conference Committee in 1992.

1. Article 9, paragraph 1, of the Convention. In reply to the Committee's previous comments on this provision of the Convention which requires employers to share in providing the financial resources of the insurance scheme, the Government again indicates that the Individual Capital Accumulation Pension System, established by Legislative Decree No. 3500 of 1980, did not envisage any compulsory contribution by employers to the worker's Pension Fund, since that Fund is constituted by the worker himself with the compulsory contribution which his employer deducts from his wages every month, with such contributions as the worker may pay voluntarily into his individual capital accumulation account, and with such voluntary deposits as the worker may make as savings in what is termed a voluntary savings account. Furthermore, Legislative Decree No. 3500, section 18, provides for a voluntary contribution by employers to the constitution of the Fund's resources in the form of "Agreed Deposits" consisting of such sum or sums which they deposit in agreement with the workers, individually or collectively, in the individual capital accumulation account. Lastly, the Government reiterates that to specify who bears the costs serves no purpose since, in wage negotiations, the employer always takes account of the gross wage and the worker, the net wage, and that the problem is therefore only one of accounting.

The Committee takes note of this information. However, it observes once again that section 18 of Legislative Decree No. 3500 of 1980, as amended by Act No. 18964 of 1990, cannot be regarded as establishing a contribution by employers to the financial resources of the compulsory insurance scheme within the meaning of Article 9, paragraph 1, of the Convention, in as much as this merely tends to be a possible supplementary contribution upon which the worker may agree with his employer without there being any legal obligation on the employer to bear the cost. Consequently, the Committee once again expresses the hope that the Government will adopt the necessary measures to give effect to the recommendations of the Committee set up by the Governing Body to examine the representation submitted by the National Trade Union Coordinating Council (CNS) of Chile, under article 24 of the Constitution, alleging non-observance by Chile of, inter alia, Convention No. 35 (see document GB.234/23/28, 234th Session, 17-21 November 1986).

2. Article 9, paragraph 4. In response to the Committee's previous comments concerning the financial contributions of the public authorities, the Government reiterates that the State's contribution to the Fund's resources is subsidiary and is laid down in sections 73 et seq. of Legislative Decree No. 3500 of 1980 as a state guarantee in respect of minimum old-age, invalidity and survivors' benefits for those insured persons who satisfy the requirements laid down in the Decree. The reason why the State's contribution is subsidiary is that the individual capital accumulation system encourages workers to save more during their active life with a view to obtaining a higher old-age pension. Consequently, the Committee is bound once again to refer to the conclusions of the Committee set up by the Governing Body, that "although the present legislation provides for the possibility of some financial participation by the State in the form of a guarantee, this participation, given its conditional and thereby exceptional nature, does not strictly correspond to the contribution to the financial resources or benefits of insurance schemes" prescribed by the Convention. The Committee again expresses the hope that the Government will adopt the necessary measures to give full effect to this provision of the Convention.

3. Article 10, paragraphs 1 and 2. In response to the Committee's previous comments, the Government reiterates in its report that the individual capital accumulation system provided for in Legislative Decree No. 3500 of 1980 entrusts the administration of the insurance scheme to institutions called "Pension Fund Administrations" (AFPs), which are limited liability companies which may be set up on the initiative of workers or their associations and it may be specified in by-laws that the profit they make shall be devoted to the grant of other social benefits to worker shareholders and their families. These institutions are entitled to payment from members, in the form of commissions. Accordingly, they are profit-making companies and were created as such, so that they would perform the task entrusted to them more effectively, and because the increased competition to attract new members would reduce the costs of their services. The Committee notes this information. However, it also notes the statement of the Government representative at the Conference Committee in 1992 that Act No. 19069 of 1981 allows trade union organizations, federations and confederations to set up their own pension fund administrations and does not require them to be limited liability companies.

In these circumstances, the Committee is bound to recall once again the recommendations of the Committee set up by the Governing Body, that the Government should adopt appropriate measures to amend Legislative Decree No. 3500 to ensure that the insurance scheme is administered by non-profit making institutions, as prescribed by these provisions of the Convention, except in cases where the administration of the scheme is entrusted to institutions founded on the initiative of the parties concerned or their associations and duly approved by the public authorities. The Committee also asks the Government to provide the text of Act No. 19069 of 1991, together with information on any new AFPs founded by workers' organizations, including those that are not limited liability companies.

4. Article 10, paragraph 4, of the Convention. In reply to the Committee's previous comments, the Government indicates that Legislative Decree No. 3500 of 1980 does not provide for any compulsory mechanism whereby members of an AFP participate in the administration and direct management of the funds, except in the case of AFPs founded by workers. However, it does not prohibit such participation. Under the new system, there is a different form of participation whereby each worker is free to join whichever fund best suits him, either because a given fund yields greater profits than others, or because it requires lower commissions, or because it provides better services. Giving such a choice to the worker is the best form of participation in the administration of resources because it compels private companies to constantly improve their management of resources, which is to the direct benefit of members.

The Committee takes note of this information. It again refers to the conclusions of the Committee set up by the Governing Body that "the participation of insured persons in the management of the AFPs results neither from the current legislation nor from the statutes of these limited liability companies, which make no reference to them or to any occupational organizations ...". Consequently, the Committee again expresses the hope that the Government will give effect to the recommendations of the Committee referred to above, and adopt the necessary measures so that the representatives of the insured persons may participate in the management of all insurance institutions under conditions to be determined by national laws or regulations, in accordance with the provisions of the Convention.

[The Government is asked to report in detail for the period ending 30 June 1994.]

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The Committee takes note of the information supplied by the Government in its report and in particular of the statistical data on the compulsory old-age insurance scheme.

1. Article 9, paragraph 1, of the Convention. In response to the Committee's previous comments, the Government repeats that Legislative Decree No. 3500 of 1980, which established the Individual Capital Accumulation Pension System, did not envisage any compulsory contribution by employers to the workers' Pension Fund, since that Fund is constituted by the worker himself with the compulsory contribution which his employer deducts from his wages every month, with such contributions as the worker may pay voluntarily into his individual capital accumulation account, and with such voluntary deposits as the worker may make as savings in what is termed a voluntary savings account. However, section 18 of Legislative Decree No. 3500 of 1980, as amended by section 1 of Act No. 18964 of 10 March 1990 provides for a voluntary contribution by employers termed "Agreed Deposits", consisting of such sum or sums which they deposit in agreement with the worker concerned, in the worker's individual capital accumulation account in order to add to the capital needed to finance an early retirement pension or to increase the amount of this pension. The Government adds that these contributions may be agreed upon between the workers and the employer individually or collectively.

The Committee has taken note of the detailed information supplied by the Government. It observes, however, that section 18 of Legislative Decree No. 3500 of 1980, as amended by Act No. 18964 of 1990, cannot be regarded as establishing a contribution by employers to the financial resources of the compulsory insurance scheme within the meaning of Article 9, paragraph 4, of the Convention inasmuch as this merely tends to be a possible supplementary contribution upon which the worker may agree with his employer without there being any legal obligation on the employer to bear its cost. The Committee consequently hopes that the Government will take the necessary measures to give effect to the recommendations of the Committee set up by the Governing Body to examine the representation submitted by the National Trade Union Coordinating Council (CNS) of Chile, under article 24 of the Constitution, alleging non-observance by Chile of, inter alia, Convention No. 35 (see document GB.234/23/28, 234th Session, 17-21 November 1986).

2. Article 9, paragraph 4. In response to the Committee's previous comments concerning the financial contributions of the public authorities, the Government confines itself to repeating that Legislative Decree No. 3500 of 1980 provides for state contribution to the financial resources through the state guarantee, laid down in sections 73 et seq., of minimum old-age, invalidity and survivors' benefits for those insured persons who satisfy the requirements laid down in the Legislative Decree. The Committee cannot but refer again to the conclusions of the Committee set up by the Governing Body, that "although the present legislation provides for the possibility of some financial participation by the State in the form of a guarantee, this participation, given its conditional and thereby exceptional nature, does not strictly correspond to the contribution to the financial resources or benefits of insurance schemes" prescribed by the Convention. The Committee again expresses the hope that the Government will adopt the necessary measures to give full effect to this provision of the Convention.

3. Article 10, paragraphs 1 and 2. In response to the Committee's previous comments, the Government states that Legislative Decree No. 3500 of 1980 entrusts the administration of the insurance scheme to the Pension Fund Administrations (AFPs); these are limited liability companies, the authority for whose existence, supervision and control is entrusted to the Pension Fund Administration Supervisory Body, a state body whose chief powers are to authorise the formation or winding up of these companies and to check on the investment of resources and the composition of the investment portfolio. In addition, AFPs may be set up on the initiative of workers or their associations and it may be specified in their statutes that such profit as they make shall be devoted to the grant of other social benefits to worker shareholders and their families.

The Committee takes note of the Government's statement. It points out that the Pension Fund Administrations (AFPs), to which the administration of pensions is entrusted by Legislative Decree No. 3500 of 1980, are limited liability companies and therefore private profit-making institutions; the fact that these institutions are subject to state supervision does not change their character, even though such supervision may diminish the risks inherent in a private institution. In this connection the Committee observes that, according to the statutes of the AFP "Futuro S.A." supplied by the Government, the company, unless the board of shareholders unanimously agrees otherwise, shall annually distribute at least 30 per cent of the liquid profits for the financial year as a cash dividend to its shareholders in proportion to their shares. Furthermore, it is not made clear in those statutes that the AFP "Futuro" S.A. belongs to workers or to workers' associations even though the Government indicates in its report that that is the case. In these circumstances, the Committee cannot but refer again to the recommendations of the Committee set up by the Governing Body that the Government should adopt appropriate measures to amend Legislative Decree No. 3500 to ensure that the insurance scheme is administered by non-profit-making institutions, as prescribed by these provisions of the Convention, except in cases where the administration of the scheme is entrusted to institutions founded on the initiative of the parties concerned or of their organisations and duly approved by the public authorities. The Committee also asks the Government to continue supplying information on the establishment of any new occupational AFPs.

4. Article 10, paragraph 4. In response to the Committee's previous comments, the Government repeats that, in accordance with this provision of the Convention, the workers participate actively in the management of the system. In addition to referring again to the seven Pension Fund Administrations in which the workers have part or total ownership and are represented on the board of directors, the Government supplies information concerning the AFP HABITAT. In this connection it states that in 1989 the board of directors of AFP HABITAT set up a nationwide Members' Participation Committee as one response to anxiety which had arisen among the shareholders; this Committee fits into the general policy pursued in the Chilean Chamber of Construction of maintaining bodies with workers' participation. This Committee, one of the first of its kind in the Chilean social insurance setting, is composed of 11 members including one pensioner and one trade union leader. The Committee holds meetings at which the insured persons are informed of the results obtained, the legal regulations and the general policies of the AFP.

The Committee takes note of this information. It again refers to the conclusions of the Committee set up by the Governing Body that "the participation of insured persons in the management of the AFPs results neither from the current legislation nor from the statutes of these limited liability companies, which make no reference to them or to any occupational organisations ... ". The text of the statutes of the AFP "Futuro" S.A., supplied by the Government, does not appear to invalidate this conclusion.

Consequently the Committee again expresses the hope that the Government will give effect to the recommendations of the Committee set up by the Governing Body, and adopt the necessary measures so that the representatives of the insured may participate in the management of all insurance institutions under conditions to be determined by national laws or regulations, in accordance with the provisions of the Convention.

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The Committee takes note of the information provided by the Government in its report for the period 1988-1989; it also takes note of the statistical information.

1. Article 9, paragraph 1 of the Convention. In reply to the Committee's comments, the Government reiterates that the monthly contributions for funding future pensions are wholly the property of the workers and that there is a one-to-one ratio between the amount deducted by the employer from each worker for insurance and the funds accumulated by that worker. At the same time, as the amount deducted depends on the worker's remuneration which is negotiated either individually or collectively with the employer, the latter makes a direct contribution to the constitution of the worker's pension fund, since, when the remuneration is fixed, the employer always takes into account the total costs related to labour. Thus, regardless of whether the contributions are paid by the workers or the employer, a balance will always be reached in accordance with the total amount that each enterprise is able to pay. Therefore, in a system of this kind the source of the contributions (whether coming from the worker's remuneration or the employer's contribution) is irrelevant, since in any event the original source is always the enterprise. Without prejudice to the foregoing, the Government is currently working on a Bill to create the Employer's Bonus, which is negotiable and whose purpose is to increase the worker's insurance assets enabling him to have access to early retirement or increase the amount of his pension. The bonus will not be subject to tax or deductions for insurance and will not have maximum or minimum limits. In this way, workers and employers will be able to prepare pension plans which may be increased, in the case of younger workers, by means of periodical deposits in their individual capital accounts or, in the case of workers who are closer to retirement age, by means of a lump sum deposit. With such a mechanism, the employers' contribution to the resources of the workers' pension funds will exceed their obligation to participate by means of contributions deducted from remuneration.

The Committee takes note of the Government's statement. In particular, it notes with interest the above-mentioned Bill and asks the Government to provide a copy of it. The Committee must stress, however, that in order for full effect to be given to this provision of the Convention, and to ensure the application of the principle of solidarity embodied in social security schemes, employers should contribute directly to the financial resources of compulsory insurance schemes for employees. In fact, when an employer pays the salary to workers, he or she is not necessarily covering the social security contributions. The Committee, therefore, hopes that the Government will adopt the necessary measure to give effect to the recommendations made by the committee set up by the Governing Body to examine the representation made by the National Trade Union Co-ordinating Council of Chile (CNS), under article 24 of the Constitution, alleging the non-application by Chile of, inter alia, Convention No. 35 (see document GB.234/23/28, 234th Session, November 1986).

2. Article 9, paragraph 4. In reply to the Committee's previous comments, the Government again refers to the various ways in which the State contributes to the financial resources of the insurance scheme. In this connection, it indicates that resources are allocated in such a way as to assist the most needy in the most effective way possible. Under this scheme, workers affiliated to the capital accumulation system are guaranteed minimum old-age, invalidity and survivors' benefits. Thus, the State allocates its resources to those workers who, because their earnings during their working life were low or because they have not contributed for a period of over 20 years, are unable to finance at least a minimum old-age pension from their assets in the individual capital accumulation system. With such a mechanism, the State is taking an active position with regard to its contribution to the financial resources of the pension funds of workers who are really in need, thereby maintaining an adequate policy of income redistribution. Thus, direct participation by the State during the active life of the worker is unnecessary, as it would not be sufficiently profitable to justify public funds being allocated to persons who are not really in need.

The Committee takes note of the information supplied by the Government. However, it cannot but refer to the conclusions of the Committee set up by the Governing Body, that "although the present legislation provides for the possibility of some financial participation by the State in the form of a guarantee, this participation, given its conditional and thereby exceptional nature, does not strictly correspond to the contribution to the financial resources or benefits of insurance schemes" prescribed by the Convention. Consequently, the Committee again expresses the hope that the Government will adopt the necessary measures to give full effect to this provision of the Convention.

3. Article 10, paragraphs 1 and 2. In reply to the Committee's previous comments, the Government indicates that the Chilean Social Insurance System fully complies with these provisions of the Convention, since the law gives broad scope for any worker concerned, or group, to found a Pension Fund Administration (AFP), and establishes the AFP Supervisory Body. In addition, the Government again refers to the facilities provided for groups of workers to form their own AFPs and states the names of those that already exist, their composition and the role and participation of the workers in them. The Committee again takes note of this information. However, it observes that no new AFPs have been created and that the Government has not provided a copy of the statutes of the AFP FUTURO, requested previously. In the circumstances, the Committee reiterates its request and asks the Government to continue to provide information on the establishment of new occupational AFPs. Lastly, it recalls once again the recommendations of the Committee set up by the Governing Body, that the Government should adopt appropriate measures to amend Legislative Decree No. 3500 to ensure that the insurance scheme is administered by non-profit-making institutions, as prescribed by these provisions of the Convention, except in cases where the administration of the scheme is entrusted to institutions founded on the initiative of the parties concerned or of their organisations and duly approved by the public authorities.

4. Article 10, paragraph 4. In reply to the Committee's previous comments, the Government again states that the workers participate actively in the administration of the system. In this connection, it refers again to the seven Pension Fund Administrations (AFPs) in which the workers have part or total ownership and are represented on the board. The Government indicates that workers also participate by choosing freely the AFP which will administer their insurance funds, in accordance with the law, which grants this right to all those affiliated to the system. Furthermore, a worker affiliated to a given AFP may transfer at no cost to another AFP when and as many times as he so wishes, according to the one most suited to his needs or in which he feels he is best represented, and he may be an active or passive, employed or self-employed member. This active participation by workers has been witnessed on various occasions, when workers or groups of workers have manifested their discontent over some specific action on the part of an AFP, and have withdrawn their funds and placed them with another AFP. The wide personal and active involvement of workers in the administration of their funds and the selection of their representatives is the basis of the Chilean insurance system.

The Committee takes note of this information. However, it must refer once again to the conclusions of the committee set up by the Governing Body, to the effect that "the participation of insured persons in the management of the AFPs results neither from the current legislation nor from the statutes of these limited liability companies, which make no reference to them nor to any occupational organisations ... even if insured persons do in fact participate to some extent in the management of some AFPs, there remains the question of the participation of insured persons in the management of the remaining AFPs".

Accordingly, the Committee again expresses the hope that the Government will give effect to the recommendations of the above-mentioned committee, and will adopt the necessary measures to ensure that the representatives of insured persons participate in the administration of all insurance institutions under conditions determined by national legislation in accordance with the provisions of the Convention.

5. With regard to its previous comments concerning the lack of participation of insured persons in the administration of the institutions of the old system, the Committee takes note of the information supplied by the Government, to the effect that, although the attributions of the administrative boards have, for the time being, been conferred on the Director of the Institute for the Standardisation of Insurance Schemes by section 6 of Legislative Decree No. 3502 of 1980, or on the persons responsible for those bodies which have not yet merged with the above Institute, according to the provisions of section 71 of Act No. 18768 this is a temporary system which is gradually being replaced by the new pensions system established by Legislative Decree No. 3500 of 1980. [The Government is asked to report in detail for the period ending 30 June 1990.]