Observation (CEACR) - adopted 1996, published 85th ILC session (1997)

Social Security (Minimum Standards) Convention, 1952 (No. 102) - Peru (Ratification: 1961)

I. With reference to the matters raised by the Committee in its comments in February-March 1995, the Government recalls that there are two social security systems in Peru: the public system, known as the National Pensions System; and the private pensions system. The Government states that it complies with the provisions of Convention No. 102 in establishing a public system and promoting the existence of private and/or mixed institutions. The coexistence of the two systems means that insured workers have access to a just and worthwhile pension and promotes a healthy efficiency and improvement in the benefits provided. It is in this context that the Government adopted Legislative Decree No. 25897 of 1992, establishing the private pensions system. The fundamental characteristics on which the private pensions system is based are free choice, private administration, compulsory savings, individual capital accumulation and the cost-benefit ratio. The Government states that the private pensions system, in view of its principles and basic characteristics, cannot be included or analysed within the scope of Convention No. 102. The Government requests the Committee to revise the provisions of this Convention with a view to including the new concepts that have been adopted recently in various countries throughout the world.

The Committee recalls that, as illustrated in its General Surveys of 1961 and 1989, Convention No. 102 was conceived in a highly flexible manner. It is possible to achieve the same level of social security through various approaches. The Conference deliberately refused to adopt a rigid terminology which would have been ill-suited to the particularly wide range of national solutions, still less to the rapid and constant developments in systems of protection (paragraph 41 of the General Survey of 1989). Nevertheless, the Convention sets forth a number of practical criteria of general applicability for the organization and functioning of social security systems (Articles 71 and 72).

In its observation of February-March 1995, the Committee noted that workers who enter the labour market for the first time in principle have the option of joining one or other of the systems. Nevertheless, once they have registered with a private pension fund administrator, workers can no longer rejoin the system administered by the Insurance Standardization Office (ONP) (previously part of the Peruvian Social Security Institute - IPSS). As a consequence, the private pensions system which currently coexists with the public system may end up replacing it. The benefits provided to workers under the private pensions system include retirement and invalidity benefits, which are covered by Parts V and IX of the Convention, which have been accepted by Peru.

In this connection, the Committee considers it appropriate to recall the discussion held in the Committee on the Application of Standards (June 1996) on other social security Conventions ratified by Peru (Conventions Nos. 35 to 40). On that occasion, a Government representative stated that the maximum amount paid in retirement benefits under the public pensions system was absolutely insufficient and retained no relation to the worker's contributions. Another Government representative stated that after 40 years, it had been demonstrated that the public system in Peru was a real disaster and was collapsing.

Taking into account the above, the Committee trusts that the Government will re-examine its position and will be in a position to supply in its next report the information requested with regard to the matters raised in its observation of February-March 1995 concerning the private pensions system as it relates to the following provisions of the Convention:

Part V (Old-age benefit), Articles 28 and 29, paragraph 1 (in relation to Article 65). The rate of the pensions provided by the private pensions system does not appear to be determined in advance, since it depends on the capital accumulated in individual capitalization accounts, and particularly on the earnings from those accounts. The Committee recalls once again that, in accordance with Article 29, paragraph 1, in conjunction with Articles 28 and 69, an old-age benefit at least equal to 40 per cent of the reference wage has to be secured to a person protected who has completed, prior to the contingency, in accordance with prescribed rules, a qualifying period which may be 30 years of contribution. The Committee would therefore be grateful if the Government would supply the statistics requested in the report form under Article 65 (Titles I and III) in order to enable it to make a full evaluation of the extent to which the old-age benefit, in all cases and irrespective of the type of scheme selected, attains the level prescribed by the Convention.

Article 30. Please indicate the measures which have been adopted or are envisaged to guarantee the full application of this provision of the Convention (payment of the benefit throughout the contingency) with regard to the "programmed retirement" system, under which monthly withdrawals may be made from the account until the accumulated capital is exhausted, in contradiction with the above Article.

Part IX (Invalidity benefit), Article 58. Please indicate how full effect is given to this provision of the Convention (payment of the benefit throughout the contingency or until an old-age benefit becomes payable) in the event of the permanent total invalidity of a worker who has selected the "programmed retirement" system.

Part XIII, Article 71, paragraph 1. The Committee notes that the cost of the benefits, certain administrative expenses and certain commissions are paid entirely by the worker who is insured under a pension fund administrator (AFP). Employers' contributions appear to be of a voluntary nature. According to Article 71, paragraph 1, "the cost of the benefits provided (...) and the cost of the administration of such benefits shall be borne collectively by way of insurance contributions or taxation or both in a manner which avoids hardship to persons of small means and takes into account the economic situation of the Member and of the classes of persons protected". The Committee once again requests the Government to indicate the measures which have been adopted or are envisaged to give full effect to the Convention in this respect.

Article 71, paragraph 2. The Committee recalls that, under the provisions of the Convention, the total of the insurance contributions borne by the employees protected shall not exceed 50 per cent of the total of the financial resources allocated to the protection of employees and their spouses and children. In order to be in a position to assess the effect given to this provision of the Convention, the Committee requests the Government to provide in its next report the statistics requested in the report form under this Article of the Convention for the whole of Peruvian social security for the Parts of the Convention which have been accepted with regard to both the private pensions and health systems (when the private health system comes into force), and the schemes administered by the public scheme.

Article 72, paragraph 1. The Committee requests the Government to indicate the measures which have been taken or are envisaged, in the context of the private pensions system, to give effect to this provision of the Convention which states that, where the administration is not entrusted to an institution regulated by the public authorities or to a government department responsible to a legislature, representatives of the persons protected shall participate in the management, or be associated with it in a consultative capacity, under prescribed conditions.

II. System of pensions administered by the ONP. The Committee notes that, according to the statement by the Government representatives to the Committee on the Application of Standards, the public pensions system is now ineffective and the benefits bear no relation to the contributions made by workers. In these circumstances, the Committee trusts that the Government will be able to indicate in its next report the measures adopted or envisaged to revitalize the public social security system, particularly with regard to pensions, in order to provide a real alternative to private schemes and to guarantee workers and their families protection against the risks of life in accordance with their needs, in conformity with the international standards ratified by Peru. In this respect, it draws the Government's attention to the specific following points:

1. Part V (Old-age benefit), Article 29, paragraph 2. The Government states that Legislative Decree No. 25967 of 1992, provides that no person insured under the national pensions system may obtain the grant of an old-age pension if he is not credited with contributions for a period of no less than 20 full years. In its opinion, Article 29, paragraph 1, provides that the benefit shall be secured to a person protected who has completed, prior to the contingency, a qualifying period which may be 30 years of contribution or employment. With regard to paragraph 2, the Government states that, in its opinion, where the benefit is conditional upon a minimum period of contribution or employment of 30 years, a reduced benefit shall be secured to a person who has completed, prior to the contingency, a qualifying period of 15 years of contribution or employment. The Committee notes this information and recalls that Article 19, paragraph 1(a), refers to the maximum period of contribution, employment or residence which may be taken into account to determine whether the old-age benefit attains the level prescribed in the schedule annexed to Part XI (40 per cent of the reference wage for a standard beneficiary). Paragraph 2(a) sets out an additional obligation, under which, where the old-age benefit is conditional upon a minimum period of contribution, a reduced benefit shall be secured to any insured person who has completed a qualifying period of 15 years of contribution or employment. This obligation must be complied with irrespective of the fact that the period taken into account for the calculation of the pension is lower than 30 years. The Committee once again requests the Government to take the necessary measures to ensure that the persons protected benefit from a reduced benefit after 15 years of contribution, as provided by this provision of the Convention.

2. Part XI (Standards to be complied with by periodical payments), Articles 65 and 66. (a) Taking into account the statement by the Government representatives at the Conference Committee on the Application of Standards, referred to above in this observation, on the absolutely insufficient nature of the periodical payments made by the ONP, the Committee hopes that the Government will be in a position to indicate in its next report the measures which have been taken to guarantee a level of benefit that is in accordance with the provisions of the Convention in the schedule annexed to Part XI.

(b) With regard to the adjustment of the rates of current periodical payments in respect of old-age and invalidity, the Government states that, as the latest census of the population was undertaken in 1994, it is possible to carry out an actuarial study of the pensions and invalidity schemes administered by the ONP. The Committee takes due note of the above and trusts that the Government will be in a position to supply with its next report the statistics required by the report form under Title XI of Article 65, which are necessary to assess the changes in long-term benefits in comparison with fluctuations in the cost of living. The Committee wishes to recall once again the importance that it attaches to the revision of the rates of current periodical payments in the case of these benefits, as required by Article 65, paragraph 10, and Article 66, paragraph 8. Taking into account the statements made by the Government representatives to the Committee on the Application of Standards, the Committee considers that the measures to be adopted by the Government to review the rate of pensions are of particular importance (see also the following point III).

III. The Committee once again notes the observations made by occupational organizations concerning the difficulties arising in the payment of social security benefits due to individuals. The Association of Retired Oil Industry Workers of the Metropolitan Area of Lima and Callao, on 25 October 1995 and 16 September 1996, referred to a government strategy to tarnish the reputation of the national pensions system as much as possible. It states that the financial and economic resources of the IPSS should not be transferred to pension fund administrators. It refers to judicial decisions recording debts by the IPSS to pensioners.

In a communication dated 4 March 1996, the Government made its own comments on the matter and referred to a case before the competent courts in which a decision was pending. The Government states that no authority can comment on matters that are before a judicial body nor interfere in the exercise of its functions. The Committee trusts that the Government will transmit the definitive court decisions pending in the relevant cases and that it will ensure the full application of the relevant provisions of the Convention, and particularly of Article 71, paragraph 3, and Article 72, paragraph 2. The Committee recalls that, under the terms of Article 71, paragraph 3, the State has to accept general responsibility for the due provision of social security benefits and take all measures required for this purpose, and that in accordance with Article 72, paragraph 2, the State has to accept general responsibility for the proper administration of the institutions and services concerned in the application of the Convention.

IV. Parts II, III and VIII (in conjunction with Parts I, XI, XII and XIII). With regard to the conditions for the award and the duration of benefits, the nature of medical care and the level of cash benefits, the Government refers to the information provided in its report on the Sickness Insurance (Industry) Convention, 1927 (No. 24). The Committee refers to the comments that it has made under Convention No. 24 and trusts that the next report for the above Convention, which has been requested for 1997, will contain sufficient information to enable it also to examine the application of the Parts referred to of Convention No. 102.

V. The Committee notes the report of the tripartite Committee set up to examine the representation made by the Latin American Central of Workers (CLAT) under article 24 of the Constitution alleging non-observance of the Convention by Peru, which was adopted by the Governing Body in November 1995 (264th Session).

Taking into account the importance of the points raised, the Committee cannot but insist that the Government adopt as soon as possible the measures required to give effect to the provisions of the Convention. It requests the Government to include in its next report all of the information requested in this observation and the direct request.

[The Government is asked to report in detail in 1997.]