Income security in old-age, disability and death of a breadwinner

Updated by Anne Drouin , Krzysztof Hagemejer , Tharcisse Nkanagu on 24.09.2012

The important policy message coming from ILO social security standards is that social security should be seen as a comprehensive and consistent set of complementary policies and measures providing income security and affordable access to medical care. To conform to international labour standards, national policies should thus build a basic set of provisions and then - as economic and social development takes place - progressively expand coverage and increase levels of protection. Social security pensions designed to provide income security at old-age, or in case of disability or loss of a breadwinner, are an inseparable part of that minimum social security package.

ILO Convention No 102, in its Parts V, IX, and X, and ILO Convention No 128 specify rights to social security benefits at retirement (old-age pension), in case of disability (disability pension) and in case of a loss of the breadwinner (survivors' pension). Specific types of disability and survivors' pension are also required in cases related to employment accident, injury or sickness as foreseen by Part VI of Convention No 102 and by Convention No 121.

Right to affordable retirement

Both Conventions (102 and 128) stipulate that old-age pensions are to be paid in the form of life annuities ("periodical payments" paid "throughout the contingency") to persons reaching the age prescribed by the national legislation. In general, this age should not be higher than 65; however, the Conventions allow to set a higher retirement age if justified. Fixing retirement age above 65 should give "due regard to the working ability of elderly persons" (Convention 102) and "demographic, economic and social criteria, which shall be demonstrated statistically" (Convention 128).

At the same time, Convention No 128 says that "If the prescribed age is 65 years or higher, the age shall be lowered, under prescribed conditions, in respect of persons who have been engaged in occupations that are deemed by national legislation, for the purpose of old-age benefit, to be arduous or unhealthy".

Right to income security on the loss of a breadwinner and disability

Conventions No 102 and No 128 stipulate that a survivors' pension should be awarded on "the loss of support as the result of the death of the breadwinner" and incapacity for self-support.

Disability pensions are to be paid in case of "inability to engage in any gainful activity, to an extent prescribed which inability is likely to be permanent or persists after the exhaustion of sickness benefit".
Disability and survivors' pensions should also be periodical payments paid "throughout the contingency" (or, in case of disability pension, "until an old-age benefit becomes payable").

Minimum pension levels

The Conventions give a wide freedom of choice concerning through what mechanism (or combination of mechanisms) old-age, disability and survivors' pensions should be delivered: earnings related or flat rate, contributory or non-contributory, means-tested or not - what is important is the outcome in terms of benefit levels.

If basic income security is to be provided mainly by the earnings-related pensions, the minimum replacement rate should be guaranteed at least for those with earnings lower than prevailing, typical, or average levels.

For old-age earnings-related pension of such lower income beneficiaries, Convention 102 requires the minimum replacement rate to be at least 40% of previous earnings after 30 years of contributions (assuming the scheme is contributory).
Survivors' earnings-related pension should also not be lower than 40%, or the disability pension less than 45%, of previous earnings of the beneficiary.
Where disability and survivors' pensions are contributory, the pension in full amount should be paid at least to those with 15 years of contributions. Reduced pensions should be provided for those with shorter contributions periods.
If pensions are paid at a flat rate, the amount should not be lower than 40% (45% in case of disability pensions) of prevailing levels of earnings of unskilled manual workers.
This also applies to pensions provided as means-tested benefits, but the level of such pensions should also meet another criterion: they "shall be sufficient to maintain the family of the beneficiary in health and decency".
Amounts of all kinds of pensions awarded originally to the beneficiaries should be reviewed regularly and adjusted accordingly following any "substantial changes" in the general level of earnings or cost of living.

Minimum standards in governance and financing

While there is a wide choice of policy measures which could be adopted to provide pension benefits, these measures should nevertheless meet certain standards concerning governance of social security pension systems and their financing:

Entitlement to benefits should be clearly specified in the legislation and "every claimant shall have a right of appeal in case of refusal of the benefit or complaint as to its quality or quantity";
There should be no discrimination and equal treatment including migrants: "non-national residents shall have the same rights as national residents";
Governments shall accept general responsibility for the proper administration of the institutions and services concerned;
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 at least be consulted; national laws or regulations may likewise decide as to the participation of representatives of employers and of the public authorities;
Governments have a general responsibility for the provision of adequate benefits and shall take all measures to ensure financial sustainability;
The overall cost of the benefits provided and the cost of the administration of such benefits shall be borne collectively by way of insurance contributions, taxation, or both, in a manner which avoids "hardship to persons of small means";
The total of the insurance contributions borne by the employees protected shall not exceed 50 per cent of the total cost of providing benefits (all provided social security benefits included).

Main Resources

Social Security Pensions
Interview with John Woodall on the transformation of provident funds into defined benefit schemes in India, Sri Lanka and Nepal.
Helpage international | Pension watch | More
ILO/INFORM thematic page on disability | More