Pension for the self-employed population in 2020

The consequences of the new pension reform leave many bewildered and fearful of the future. Self-employed citizens stand apart in the pension system, so questions about how a pension for the self-employed is formed and the procedure for calculating it are something that deserves special attention .

The question of who can be classified as this category of the population in the Russian Federation can be considered from two positions.

Departmental legal acts define self-employed citizens as individuals who provide work for themselves, using civil law contracts as a basis.

Thus, this category of persons includes:

• IP (individual entrepreneurs);

• Persons carrying out activities that fall under the concept of private practice, for example: lawyers, appraisers, notaries, mediators, arbitration managers, etc.;

• Persons providing services to the public .

According to the second position, only the latter can be included in the category of persons in question.

The basis for the program is: Order of the Government of the Russian Federation No. 1083-r, the Tax Code of the Russian Federation and letter of the Federal Tax Service of Russia No. GD-4-14/1786.

What is self-employment

In Russia, the experiment on self-employment began in 2019, despite the introduction of the concept several years ago. However, there is still no specific legal concept. By indirect evidence, self-employment includes activities with the following characteristics:

• absence of an employer - the self-employed person independently looks for clients and provides them with relevant services, sells goods;
• receiving income directly from your activities;
• lack of hired workers;
• annual income does not exceed 2.4 million rubles. or 200,000 rub. per month

In this case, the self-employed citizen assumes all risks. He is required to pay special tax on professional income in full. Part of the funds from collected taxes is sent to compulsory insurance (CHI, Social Insurance Fund). But the funds are not sent to the Pension Fund.

Does the work experience count for the self-employed?

To understand whether the self-employed have enough experience and whether they are entitled to a pension, you should refer to the current legislation. Based on Government Resolution No. 1015 of 10/02/2014 “On approval of the Rules for calculating and confirming the insurance period for establishing insurance pensions”, after registering the subject as an insured citizen, any work activity must be officially recorded with a document confirming the payment of the required taxes.

Peculiarities of labor activity of the self-employed in the Russian Federation

The length of service can be calculated based on the period for which contributions were accrued to the Pension Fund account.

These deductions for a self-employed person can be made not only by him, but also by his employer, if this subject is officially established as an employee. The smallest amount for contributions, according to data for 2020, is 36,238.00 rubles. It depends on the minimum wage (SMW), which changes regularly every year.

There are also cases when the length of service increases, even if contributions are not calculated. Here are some of them:

• Conscript service in the army.
• Long sick leave.
• Caring for a disabled person.
• Temporary incapacity.
• Childcare for children up to one and a half years old (must be no more than six years old in total).

Is self-employment included in work experience?

From this we can conclude that self-employed and pensions are compatible concepts.

Pension rights of the self-employed

Citizens who take this path prefer to consult lawyers about the features of the special regime for the self-employed. Many people are interested in “pitfalls” – those non-obvious aspects of taxation that cannot be directly read in the law. Of course, people are concerned about whether the self-employed will pay contributions to the Pension Fund. This is one of the most frequently asked questions during legal consultations on the topic of self-employment.

To understand what pension rights a self-employed person may have, it is worth turning to the specifics of the Russian pension system. Taking into account the fact that the country has 3 types of pensions for “civilian” persons, a self-employed person can apply for any of them:

• social pension - paid to all citizens, regardless of length of service and accumulated points, but later than retirement age (from 2019, excluding transitional provisions - 70 years for men and 65 for women);
• insurance pension - assigned to citizens who have completed at least the minimum length of service and accumulated the minimum required points (in 2019, 10 years of experience and 16.2 pension points are required);
• funded pension - paid only to those citizens who made monthly contributions to the funded part of the pension.

Since points and experience are taken into account only in the Pension Fund, a self-employed person does not accumulate either experience or points. Consequently, a social pension is available to him, as well as a funded pension, provided that the citizen independently makes contributions to the NPF bypassing the Pension Fund. But access to an insurance pension is still possible.

What does pension provision mean?

Pension provision for self-employed citizens will be closely linked with participation in filling the fund’s budget and deduction of taxes. Eligible payers may qualify for the following types of pensions:

• insurance (taking into account accumulated work experience and pension points);
• savings (will depend on the payments made by the citizen to the account);
• social (grace period for a certain category of persons).

And in accordance with the current pension law “On Insurance Pensions” No. 400-FZ, the insurance pension has several more clarifications by type:

• by old age (age);
• on disability;
• in case of loss of a breadwinner.

The main point of pension insurance for self-employment is that persons without state registration are both employees and bosses in relation to themselves. But pension contributions for citizens who are employed are made by the employer according to the standard scheme. Therefore, they must independently take care of accumulating the tax base, i.e. register and periodically make contributions to the Russian Pension Fund.

Insurance pension and self-employment

In Russia, a self-employed citizen is both an employee and an employer; he has the right to make contributions to the Pension Fund for himself. The Fund counts towards the length of service only those periods when a contribution to the Pension Fund is paid for a citizen. Pension points on a personal account are formed in a similar way - in accordance with the funds deposited. Consequently, an insurance pension for self-employed citizens is available subject to a number of conditions.

1. Register with the fiscal authorities as a self-employed citizen. For most people who receive income from professional activities, this is easy to do by using the special “My Tax” application that works on mobile devices.
2. Formalize legal relations with the Pension Fund. This is an official registration with the Foundation, entailing legal consequences. In particular, the citizen undertakes to pay part of his income to the Fund in exchange for the formation of pension rights.
3. Make payments to the Pension Fund. The size is determined not by the self-employed person himself, but by the income actually received during the year. Information is transmitted to the Fund by fiscal authorities.
4. Upon reaching retirement age, contact the Pension Fund for a pension.

Payment procedure and amount of pension contributions

Art. 430 of the Tax Code of the Russian Federation establishes the amount of contributions to the Pension Fund depending on the type of activity and level of income.

Thus, in the absence of legislative exceptions, the amount of contributions in 2020 is 26,545 rubles , in 2019 - 29,345 rubles, in 2020 - 32,448 rubles per year . These figures are relevant for annual income of less than 300,000 rubles.

For income in excess of this amount, the person will additionally have to pay another 1% of the final amount of income above this threshold for the year.

But the pension contribution cannot be more than eight times the payment amount, thus, the maximum contributions in 2020 are 260 thousand rubles .

There are some nuances for certain categories of citizens. Thus, the head of a peasant farm pays contributions in the same manner as an individual entrepreneur, despite the fact that he may be a legal entity. In this case, the contribution is multiplied by the number of participants in the peasant farm, including the head.

For citizens who are included in the list of clause 70 of Art. 217 of the Tax Code of the Russian Federation and those registered for tax purposes have tax holidays. They are exempt from payments in accordance with legislative regulations.

Payments must be made to the Pension Fund before December 31 of the accounting year , otherwise a penalty will be charged. Payments can be split and paid in installments every month, quarter or in a lump sum.

Contribution amount

Of course, the Pension Fund can answer the question not only about whether the self-employed will receive a pension, but also about what kind of pension will be established. Since the minimum payment is 29,354 for the 2019 billing period, the citizen will be credited with only 1 pension point. Consequently, over 30 years of work, a self-employed citizen will accumulate 30 points required for retirement in 2025. At the same time, the amount of pension support will be minimal, and the citizen will be paid up to the cost of living of a pensioner in the region of residence.

The amount of accrual of the individual pension coefficient can be increased by making additional contributions. For example, by doubling contributions you can count on 2 pension points, etc. In this case, the length of service will be accrued only for the billing period, and not for the number of “purchased” pension points.

Upon reaching retirement age, a self-employed person has the right to apply for a pension. However, the same rule applies here as for employees. The later a person applies for a pension, the more bonus coefficients he will be accrued. However, you can do it differently - retire, and at the same time continue your individual activities.

How to apply for a pension for a self-employed person

Please note that pensions for self-employed citizens are issued according to the generally accepted procedure:

1. Contact the Pension Fund or the Multifunctional Center.
2. Fill out the appropriate application.
3. Submit it along with the necessary package of documents to the customer service employee.
4. Wait for the decision to be made. If the result is positive, start receiving appropriate pension benefits. If you refuse, receive a written justification.

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List of required documents

After filling out an application for a pension, a citizen must attach a certain package of documents to it:

• passport or other equivalent document;
• SNILS;
• documentary evidence of length of service and payment of insurance premiums.

A citizen can apply for a pension benefit independently or through his legal representative (if the latter has a notarized power of attorney). In addition, there are other ways:

• by mail;
• through your personal account on the Pension Fund website.

Self-employed pensioners

Persons of retirement age who receive an insurance pension from the state have the right to engage in any labor activity, including receiving income from professional activities. In other words, a pensioner can be self-employed, but this entails certain consequences.

Pensioner Zinaida I. applied for legal assistance. A resident of Moscow registered as a self-employed citizen because she knitted and sold clothes as a part-time job. The woman was interested in whether her pension would be indexed, since she officially does not work anywhere. The lawyer explained to the pensioner that the income derived from her activities excludes not only the indexation of the pension, but also cancels all social supplements accrued to her. The specialist recommended that the woman either give up “self-employment” and live on a pension, or notify the authorities about receiving income for the subsequent cancellation of the social supplement. If a woman continues her activity, but at the same time receives social benefits, her actions may be qualified under Art. 159.2 of the Criminal Code of the Russian Federation.

Pensions for self-employed pensioners are not indexed. Such citizens are equal to employed pension recipients. But if a self-employed pensioner enters into a voluntary legal relationship with the Pension Fund, he will be subject to an annual adjustment based on the amount of points purchased from the Pension Fund.

Features of self-employed status

The pension reform carried out in 2020 affected all categories of citizens engaged in labor activities. That is, the new rules for calculating pension benefits apply to both those who have a relationship with the employer and those who are in self-employed status.

Self-employed are citizens who act as founders of an enterprise or organize activities that periodically generate income, that is, these are persons who:

• Through their own efforts they created a workplace for themselves;
• Have an officially registered form of business;
• Pay mandatory fees in accordance with the established procedure.

The main distinctive feature of this status is the need to independently generate reports to an extra-budgetary fund and pay the appropriate insurance premiums.

Category Features:

1. According to the legal regulations, the self-employed include:

• IP;
• Persons engaged in private practice, but not classified as individual entrepreneurs (notary offices, law offices);
• Citizens who derive income from the provision of paid work and services (nannies, tutors and others);
• Managers, founders of peasant farms;

1. Since the rules oblige self-employed citizens to pay only contributions to taxes, the Pension Fund and compulsory medical insurance, and fees to the Social Insurance Fund are paid at will, there is a risk of not providing them with maintenance in the event of temporary loss of ability to work (the occurrence of an insured event);

The procedure for determining pensions for the self-employed population is no different from the basic algorithm, therefore, when assigning maintenance, only those periods during which insurance contributions were made are taken into account. In other words, the size of the pension of citizens working “for themselves” depends on the following factors:

• The amount of insurance premiums paid;
• Conscientiousness and compliance with the frequency of making contributions to the Pension Fund;
• Duration of official activity.

If you do not register with the Pension Fund

A self-employed citizen is not required to make payments to the Pension Fund towards a future pension. However, in this case the citizen will not have access to an old-age insurance pension. The only exceptions are those who:

• has already accumulated the minimum required insurance experience and IPC;
• have already exercised the right to an insurance pension.

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.

Who is self-employed?

According to the law, self-employed citizens are their own employers and employees at the same time. These include:

• individual entrepreneurs;
• managers and members of farm, agricultural, peasant farms (peasant farms);
• persons engaged in private legal practice (notaries, arbitration managers, lawyers);
• non-individual entrepreneurs who provide various types of services or perform certain types of work (cleaners, tutors).

Can a self-employed person go on maternity leave?

Self-employed people do not need to make contributions to the Social Insurance Fund (SIF). And they cannot do this voluntarily. That is why they only have access to minimal maternity payments from the state. Without any additional payments due to their previous contributions, if in the previous two years the self-employed woman did not officially work anywhere.

The state will pay self-employed people who decide to go on maternity leave based on the minimum wage - in 2020 it is 12,310 rubles:

• One-time payment for pregnancy and childbirth - 18,144 ₽.
• Allowance for child care up to 1.5 years old - 4852 ₽/month for the first-born and 6804 ₽ for each subsequent child.

At the birth of a child, you can contact the social security department in person, through the MFC or at the State Services to apply for child care benefits, first up to 1.5 years. And then up to 3–7 years, if the family’s income is less than the subsistence level.

Summary

Self-employed persons - those who work under Law No. 422-FZ (as well as individual entrepreneurs or ordinary individuals who provide for themselves) can form their pension in different ways. NPA payers (as individuals not registered as individual entrepreneurs) do not pay pension contributions - but can agree with the Pension Fund on their voluntary transfer.

Voluntary legal relations with the Pension Fund of any self-employed persons can be combined with their private initiatives to form pensions in non-state pension funds, as well as to accumulate their own capital on deposits - which they can start spending in old age.

Individual entrepreneurs are required to pay mandatory pension contributions. Along with their payment, individual entrepreneurs, like any other self-employed, have the right to transfer voluntary pension contributions to the Pension Fund.

In all cases, a self-employed individual must accumulate at least 15 years of experience and 30 pension points in order to receive the right to a pension upon reaching normal retirement age. If the required indicators are not achieved, then the person is entitled only to a later “social” pension.