Right to pension for an entrepreneur
An individual entrepreneur has exactly the same rights as other citizens included in the pension insurance system of the Russian Federation. That is, they are guaranteed:
- entry into old-age insurance pension at 65/60 years (men/women, excluding transitional provisions);
- retirement from a social old-age pension in the absence of the required length of service and (or) the minimum amount of points in the account;
- access to a disability insurance pension, subject to its appointment.
For entrepreneurs, exactly the same rules apply as for other categories of citizens when assigning an insurance pension. We are talking about the minimum length of service and the amount of pension points.
Since 2020, these values have been steadily increasing. If in 2015 you only needed 6 years of experience with 6.6 points, then in 2019 you already need 10 years of experience and 16.2 points. And by 2025, the requirements will completely rise to 15 years / 30 IPK.
How to calculate an individual entrepreneur's pension
The pension benefit is calculated using the formula:
SP = IPC x SB + PV
Where:
SP – insurance pension;
IPC – individual pension coefficient; to calculate a pension it must be at least 13.8 points;
SB – annually adjusted ruble value of the point;
FV – annually adjusted ruble fixed payment.
An example of calculating pension benefits in 2018:
Insurance pension = IPK x 81.49 + 4,982.90.
Then the minimum pension payment in 2018 will be:
SP = 13.8 x 81.49 + 4,982.90 = 6,107.46 rubles.
It is difficult to calculate the IPC value for an individual entrepreneur on your own, and to determine its value you should contact the Pension Fund or obtain information through the State Services portal.
The Pension Fund website contains a pension calculator that you can also use.
It should be borne in mind that such calculations are more of an informational nature; moreover, they are not suitable for a number of categories of citizens:
- military personnel;
- law enforcement officers and others.
The Pension Calculator is not intended to provide accurate information about your pension amount. Its purpose is to show the calculation scheme and the factors influencing the size of the pension.
For individual entrepreneurs operating in different tax regimes, the calculation of tax contributions is determined based on clause 9 of Article 430 of the Tax Code of the Russian Federation.
Pension benefits for entrepreneurs are calculated on a general basis for individuals to whom they are equated, subject to the fulfillment of the necessary conditions and regularly transferred insurance contributions.
Individual entrepreneur on a simplified basis and UTII
For the simplified tax system, the amount of profit from which the insurance premium is calculated is equal to the total income for the billing period. The declaration contains line 113.
With UTII, pension contributions are made from the amount of imputed income. In the UTII declaration this is line 100.
IP on OSN
Individual entrepreneurs working on the general taxation system calculate pension contributions as the difference between income and professional deductions, in accordance with clause 3 of Article 210 of the Tax Code of the Russian Federation. This value is reflected in the 3-NDFL declaration, line 060.
Confirmation of experience for individual entrepreneurs
The length of service of an individual entrepreneur is not calculated according to the work book. As you know, entrepreneurs cannot reflect information about their work in the work book. Therefore, other papers are used as documents confirming entrepreneurial experience. In particular, we are talking about Certificates issued by the tax authorities at the place of registration. There you can also get certificates, which are sometimes additionally requested by the Pension Fund.
In addition, it is worth having documentary evidence of payments made “for yourself”. Of course, all accrued IPCs are reflected in the Pension Fund of the Russian Federation, but in some cases errors are possible and some payments are not made. Therefore, you should at least take care of statements of the movement of funds on accounts for the periods in which deductions were made.
Most entrepreneurs pay a fixed amount of contributions “for themselves”. In 2020, the contribution to the Pension Fund will be 29,354 rubles. With income over 300,000 rubles. you will also have to pay an additional 1% of the amount exceeding the threshold. But the maximum accepted contribution to the Pension Fund account will be 234,832 rubles, which will ensure the accrual of 8 pension points. With a minimum amount of deductions, about 1 point will be awarded for each year of entrepreneurship.
It is worth noting that the accrued points reflected in the account with the Pension Fund significantly affect the size of the future pension. With minimal contributions, an entrepreneur will need at least 30 years of “entrepreneurship” to secure a minimum pension. Therefore, there is no particular point in hiding income, because in this case you will not be able to earn money for a decent old age.
Some exception is the “northern experience”. The insurance experience of individual entrepreneurs operating in the Far North and equivalent regions is calculated in accordance with the law and gives certain preferences.
What pension can an individual entrepreneur expect?
Unlike employees, the size of an entrepreneur's pension does not depend on wages, but on the size of a fixed payment. In addition, if the annual profit exceeds 300,000.00 rubles, the entrepreneur pays 1% on the excess amount.
From the beginning of 2020, insurance premiums do not depend on the minimum wage (minimum wage) and are calculated based on the following:
- with an annual income of less than 300,000.00 rubles, the insurance premium will be 26,545.00 rubles;
- if income is above 300,000.00 rubles - from the amount exceeding 1%, but not more than 212,360.00 rubles.
Pension payments for entrepreneurs without the formation of a legal entity are made on a general basis:
- women - from 55 years old;
- for men - from 60 years old.
- availability of insurance experience (in 2020 – 9 years with an annual increase of 1 year).
If an individual entrepreneur combines entrepreneurial activity with employment, then when calculating the pension, the total payments of the individual entrepreneur + employer are taken into account.
Special experience for individual entrepreneurs
Entrepreneurs who lived and worked in the Far North have the right:
- for early assignment of a pension - subject to a certain duration of work in the KS (20 years for districts equivalent to the KS) and a minimum duration of total length of service.
- to maintain a northern pension when moving to a less harsh climate, provided that they work in a CS environment for at least 15 years and have a total length of service of 25 years.
Special experience in this case is confirmed by certain documents:
- a certificate from the fiscal authorities on income/expenses for the period of business activity in the Far North;
- the presence of agreements with companies, organizations, and other legal entities located in the Far North on the provision of relevant services;
- certificates of lease of space (retail, industrial, office) directly in the northern region;
- salary slips for workers who were hired in the Far North.
The entrepreneur has no other legal grounds for specifically calculating length of service. However, like employees, some non-insurance periods also count towards the total length of service.
Is the length of service required for an individual entrepreneur's pension?
The answer to the question whether the period of work as an individual entrepreneur is taken into account when calculating a pension is positive: yes, but only the period of time for which payments were made to the Pension Fund, including the period of employment, is counted.
In case of unofficial work and lack of registration, the entire period of such activity will not be counted. Pensions are calculated for private entrepreneurs on the basis of a number of regulations:
- Order of the Ministry of Health and Social Development No. 91. Here is a list of periods of entrepreneurial and other activities counted as length of service.
- Government Decree No. 1015. Established a provision according to which the period of activity during which taxes were paid is considered completed and is counted as length of service.
- Federal Law On Labor Pensions, which established the procedure for calculating payments and length of service of the subject.
- Federal Law On State Registration of Legal Entities and Individual Entrepreneurs. He established a list of required documents, information from which will then be used to calculate benefits.
- Federal Law No. 212 (Article 16), which defines the conditions for amounts payable as insurance premiums.
Private entrepreneurs are not recognized by law as legal entities. But businessmen themselves are not “hired employees.” They are perceived as individuals who work in small and medium-sized businesses and have the right to hire staff.
If they act as an employer, individual entrepreneurs must also make payments to the Pension Fund and the Social Insurance Fund for each employed employee - regardless of the taxation scheme (general or simplified tax system).
Such a person may have a work book if only he previously worked as an employee (Article 66 of the Labor Code). It cannot be opened for a private entrepreneur at all, since he is not a hired employee. His experience is confirmed in the certificate of registration or termination of work as an individual entrepreneur. Issues the document from the Federal Tax Service.
All information about payers is contained in the Pension Fund database. Therefore, there is no need to submit additional documents there to confirm your experience. Local branches of the Pension Fund register all individual entrepreneurs using data provided by the Federal Tax Service and other structures of the Ministry of Justice.
Important
If problems arise with calculating the length of service of an individual entrepreneur, you will need to submit documents, a list of which is given in Government Decree No. 555.
Other periods of experience for individual entrepreneurs
The length of service of an individual entrepreneur for calculating a pension is calculated not only for the periods of doing business, but also on other grounds. The following counts:
- military service upon conscription;
- care for children up to 1.5 years (maximum 6 years are taken into account, i.e. 4 such periods);
- care for disabled people and elderly people over 80 years of age;
- registered as unemployed.
It cannot be said that only one type of length of service is required to assign a pension. Moreover, entrepreneurial experience is practically no different from the periods that are included in the length of service for employees. Any type of service will determine the corresponding pension rights.
Consequently, an individual entrepreneur can be an employee and at the same time conduct business activities, or alternate these periods. It is only important to notify the Pension Fund in a timely manner about the opening and closing of an individual entrepreneur, so as not to “run into a fine.” It is also worth considering that when calculating length of service (unlike IPC), combining entrepreneurial activity and official employment will not lead to an increase in length of service. Pension points, in turn, will be accrued both through the official employer and through contributions made by the entrepreneur “for himself”. And yet, the length of service and points may not be enough to retire in old age.
How to apply for a pension for an individual entrepreneur
The procedure for going on vacation for individual entrepreneurs is the same as for other citizens. It is contained in the Rules enshrined in the Resolution of the Ministry of Labor of the Russian Federation and the Pension Fund of the Russian Federation No. 17/19пб.
Anyone wishing to apply for a pension must visit the local PFR branch at their place of residence, submitting an application there on their own behalf and a number of required documents:
- Passport.
- SNILS.
- Work record book and other documents confirming the length of service (as an individual entrepreneur and an employee).
- Certificate of registration (sheet from the Unified State Register of Individual Entrepreneurs) and closure.
- A certificate confirming the absence of debts to the Federal Tax Service and the Pension Fund.
- Papers that will allow you to issue an increased amount of payments.
The last type includes:
- Certificates of disability.
- Military ID.
- Document on participation in government procurement.
- Certificate of availability of disabled family members and relatives supported by the future pensioner.
- Other documents confirming the right to a pension increase.
Attention!
If the individual entrepreneur was closed before retirement, then the deregistration document must contain a note from the Pension Fund confirming that it made mandatory contributions throughout the entire period of its activity.
sample certificate from the Pension Fund office
Other evidence may be requested:
- Certificate of change of surname.
- Birth certificates of children.
- Employment contracts, agreements with contractors, etc.
- Document confirming military service, etc.
The Pension Fund is given 10 days to review the provided evidence and respond. The received application will be registered, and the applicant will be given a receipt with the date of receipt of the certificates and, if necessary, a list of missing papers.
The pension is calculated from the moment the citizen applies to the Pension Fund. In the case of filing papers by postal order, the date indicated on the postmark is considered to be the beginning.
You have 3 months to submit missing certificates. The list of all additional required documents is enshrined in Government Decree No. 555. Having completed it within the specified period, the date of receipt of the application is recognized as the accrual day.
If an entrepreneur retired and began to receive the payments due to him, but continued to work, then he will temporarily lose the indexation of payments. This is a uniform provision that applies to all employed pensioners - they are provided only with an annual August recalculation.
So, individual entrepreneurs, like employees, are entitled to receive government benefits if they meet a number of conditions by the time they reach retirement age. The procedure for registering leave for vacation changes slightly if a citizen has chosen to work as an individual entrepreneur as the main factor in calculating payments.
In general, an entrepreneur must, unlike hired employees, take care of his own future security. At the moment, the pension system is undergoing significant changes, so in the future the pension provision of entrepreneurs may be revised.
If you don't have enough experience
Taking into account Russian realities, not all entrepreneurs legalize their business. Remaining in the “shadows,” especially during the period when there was no decision on self-employment, people did not make contributions to the Pension Fund for years and decades. The logical result is the lack of experience and points for granting a pension.
In such a situation, a citizen who has laid aside the burden of entrepreneurship has the right to purchase additional experience and points by entering into a voluntary legal relationship with the Pension Fund.
Muscovite Varvara L. made a living by sewing clothes at home. At the age of 40, the woman became concerned about her pension and therefore decided to seek help from a lawyer. Varvara was interested in whether she could retroactively buy length of service and pension coefficients. The lawyer said that the right to purchase can arise only if the woman has ½ of the required length of service, i.e. in her case - 7.5 years. For this period, he recommended that Varvara register for self-employment or individual entrepreneurs so that length of service and pension points would be accrued.
Due to frequent updates to legislation and the legal uniqueness of each situation, we recommend obtaining a free telephone consultation with a lawyer. You can ask your question by calling the hotline number 8 (800) 555-40-36 or write it in the form below.
The necessary conditions
The old-age benefit is actually paid from funds transferred to the pension fund during the work process.
There are several conditions for receiving old-age pension payments:
- approaching retirement age;
- insurance experience over 5 years (as of 2020);
- regular transfer of funds to the Pension Fund.
In other words, the period of entrepreneurial activity is counted into the insurance period only if contributions are regularly transferred to the Pension Fund.
Without payment to the pension fund, the period of work of the individual entrepreneur will not be taken into account when calculating the pension benefit.
