Hello! In this article we will talk about the work experience of individual entrepreneurs.
Today you will learn:
- Does the individual entrepreneur have work experience?
- How the future pension is calculated and accrued;
- What is needed to confirm work experience.
Often people, having started their own business, do not think about their work experience at all, paying all their attention to the formation of their business. But when things take off, the entrepreneur thinks about whether his work experience is going well and what kind of pension he will receive in the future. This question is important and relevant, so today’s conversation is about this.
How is length of service related to pension?
Let's start understanding this issue with a simple concept of what a pension is.
A pension is a payment of money by the state to a citizen every month as compensation for earnings that have been lost.
She is appointed by the state. bodies that calculate how long a citizen’s labor activity lasted, as well as how many payments were made to the Pension Fund.
Taking this into account, in order for individual entrepreneurs to be able to count on payments, several conditions must be met:
- The individual entrepreneur paid monthly insurance premiums from his income and regularly contributed funds to the Pension Fund;
- The age to receive a pension has been reached;
- The minimum insurance period must be more than 5 years.
This means that the experience gained during the period of activity as an individual entrepreneur will be included in the years of total experience if contributions were paid. Simply put, if these conditions are met and retirement age is reached, the individual entrepreneur can become an applicant for a pension.
How to calculate future pension benefits?
The pension calculation procedure takes into account many nuances. Therefore, you can independently calculate only an approximate amount.
Consider an entrepreneur who pays contributions of 62,000 rubles every year. Let us conventionally assume that he will continue to work for the next 35 years and transfer the same amount to the Pension Fund.
The procedure for calculating the pension amount is as follows:
- It is necessary to calculate insurance premiums from the established maximum base based on the individual part of the contributions. In 2020, the maximum base is 1,150,000 rubles. This means that insurance premiums will be equal to 1,150,000 x 16% = 184,000 rubles.
- Let's determine the size of the individual coefficient. To do this, you need to divide the amount of transferred contributions by insurance premiums from the base and multiply by 10%. 62000 / 184000 x 10 = 3.37
- Conventionally, this coefficient will remain the same for 35 years. Then upon retirement it will be 3.37 x 35 = 117.95
- This year, each pension point costs 87.24 rubles. Then the pension amount will be 87.24 x 117.95 = 10,290 rubles.
- Let's add to this amount a fixed payment of 5334.19 + 10290 = 15624.19 rubles.
Confirmation of experience
People who work as employees can confirm the fact of their activity with a work book. At each place of work, the necessary entries are made.
If an entrepreneur takes on workers, he automatically becomes an employer, which means he is obliged to create a work book for each of them. But he cannot make entries for himself, which means he can confirm the work experience of an individual entrepreneur in another way.
When the individual entrepreneur opened, the entrepreneur’s work experience began. And when he entered into a voluntary agreement with the Social Insurance Fund and began paying contributions, the insurance began.
There is one nuance that the individual entrepreneur’s work experience significantly influences. This is admission to participation in government procurement. Now the experience that the performer has is taken into account.
An entrepreneur can also confirm his work experience with a state certificate. registration of individual entrepreneurs and a certificate of termination of such activities. It is these documents that confirm a specific period of activity. You also need to get a certificate from the territorial division of the FSS.
But the situation may turn out to be that the period of work was interrupted due to various circumstances. Some of them are equivalent to work activity, which means they give the right to receive a higher pension in the future.
Such serious life circumstances include:
- A break due to the birth of a child;
- A break due to a child’s illness;
- Military service;
- Service in the Ministry of Emergency Situations;
- Service in the penitentiary system;
- Imprisonment (if the convicted person was involved in paid work).
Features of determining and forming the length of service of an individual entrepreneur
To receive a pension you must confirm your work experience
In order to be eligible to receive an insurance pension, you must confirm your work experience when applying to the Pension Fund. This term currently requires clarification.
Until 2002, it designated the time worked by a person, which can be confirmed by documents. The main one is the work book. After this date, a different term is used. Now we are talking about insurance experience. It is confirmed by entries in the personalized accounting database of the Pension Fund.
An individual entrepreneur who is the owner of his own business does not have the right to draw up a work book for himself, except in cases where he himself is an employee in another company. If he stopped doing business and became an ordinary worker, then this period is not reflected in his work record.
However, since, starting from 2002, the insurance period is taken into account according to personalized records, and not according to entries in the work book, it must be taken into account that individual entrepreneurs, according to legal requirements, are obliged to pay contributions to the Pension Fund not only for their employees, but also for myself. Therefore, the time of his activity is taken into account as the insurance period for the pension.
Since he pays contributions for the period from the date of registration until the moment he is deregistered, all this time is taken into account when receiving a pension.
If an individual entrepreneur is simultaneously an entrepreneur and an employee in another company, then pension contributions, according to the law, must be made in both places independently.
Documents required for approval of individual entrepreneur experience
To calculate your pension, you must provide supporting documents. These may include:
- employment history;
- extract from the archive;
- military ID;
- child's birth certificate;
- certificate of employment at a diplomatic mission;
- certificate of residence in a military camp where there was no possibility of employment.
The pension fund has the right to require additional documents if necessary to clarify the issue of pension experience.
Reflection of the entrepreneur's experience in the work book
The work book is provided for records of employment and dismissal of persons who are in an employment relationship with the employer
An individual entrepreneur runs his own business, but is not an employee. The work book is provided for records of employment and dismissal of persons who are in an employment relationship with the employer. Therefore, an individual entrepreneur is not allowed to make entries in this document in connection with his business.
How is the pension amount calculated for an individual entrepreneur?
Now the pension reform is going through hard times. Legislators are trying to develop the most optimal mechanism for calculating pensions, which would ensure a decent old age, but at the same time depend on the individual labor merits of specific citizens.
It is difficult to say what exact pension awaits an individual entrepreneur, since laws are constantly being adjusted. We can only roughly calculate its future size, taking into account the amendments that have currently been adopted.
So, one of the most important calculation components will be the determination of the individual pension coefficient (IPC).
The individual pension coefficient is a certain value calculated in points taking into account indicators - retirement age + insurance period + total amount of paid pension contributions.
Important! The more points an individual entrepreneur accumulates, the higher his pension will be. The number of points also depends on the amount of insurance premiums paid.
To calculate the coefficient yourself you need to use the formula:
IPC = the amount of paid insurance premiums ( SV ), divided by the maximum possible tax base ( MNB ) and multiplied by 10.
SV = the amount of fixed contributions paid by the individual entrepreneur for the year + additional contributions from excess income of 300 thousand rubles.
The MNS is established by law. In 2020, its monthly amount is 95,833 before deduction of personal income tax and, accordingly, the annual amount is 1,150,000 rubles. (95,833 * 12 months), 16% of the tariff is included in the calculations.
Here's an example of a calculation:
Let's say IP Bogatov A.V. worked 2020 with an annual income of 300 thousand rubles. He paid 29,354 rubles to the Pension Fund. (amount of fixed insurance premiums).
MNB is equal to: 1,150,000 * 16% = 184,000 rubles.
We calculate the IPC : 29,354 / 184,000 * 10 = 1.60 points
As a result of the calculations made, we conclude: IP Bogatov A.V. for 2019, 1.60 points will be awarded.
To calculate the pension, the sum of all accumulated points is taken. This is one of the indicators of the size of the future pension. If an individual entrepreneur retires in 2020, then his IPC
In order to calculate an individual entrepreneur’s pension, you must use the following calculation:
Insurance pension ( SP ) = individual pension coefficient ( IPK ) * cost of one point ( SB) in rubles + fixed payment ( PV )
What is FV ? This is the basic or fixed part of the pension, set annually. So for 2020 its size is 5,334.19 rubles.
What is SB ? This is the cost of one individual pension point. Established by law, annually. In 2020, its size is 87.24 rubles.
We described above what IPC Its minimum amount for retirement in 2020 is 16.2 points.
The calculation can be adjusted to the bonus coefficient assigned for the fact that the individual entrepreneur applies for a pension not in the year of reaching retirement age, but later.
If we take into account all the components, then the calculation of the minimum pension for an individual entrepreneur in 2020 will look like this:
16.2 points * 87.24 rub. + 5,334.19 rub. = 6,747.48 rubles
What does it take for an individual entrepreneur to receive a pension?
In order for an individual entrepreneur to have work experience and, as a result of his activities, to be entitled to receive a pension, the following conditions must be met:
- Availability of a certain amount of insurance experience. For the current year, its size is 7 years and until 2024 this figure will gradually increase, subsequently reaching 15 years.
- A certain age of a citizen. As of 2020, men must reach a full 60 years of age, while women need to reach a slightly lower age of 55 years.
- A certain size of the pension coefficient - for the current year, a value of 9 points is sufficient; by 2025, its size will increase significantly and amount to 30.
If at the time of retirement an individual entrepreneur does not meet the necessary requirements, then it is possible to register on the general system with a deficiency in the estimated work experience. In this case, the pension amount will be the minimum possible in our country.
Individual entrepreneur pensions in 2020
The most serious changes concern those entrepreneurs who continue to work while receiving a pension. Back in 2020, it was decided not to index their pension payments. This change is still relevant today.
If an entrepreneur does not work, then compared to last year he can apply for an increase in pension.
In order to apply for an individual entrepreneur pension in 2020, the following conditions must be met:
- Retirement age has been reached: women - 60.6 years, men - 65.6 years, taking into account the transitional provisions provided for in Appendix No. 6 to Law No. 400-FZ).
- The individual pension point coefficient is not lower than the value established by law. For example, in 2020 it is 16.2, and by 2020 it will be 30 points.
- There is a minimum insurance period for calculating a pension. In 2019 this is 10 years, by 2025 it is planned to increase it to 15 years.
When assigning a pension to an individual entrepreneur, additional points will be added for the following periods:
- Time spent in the army - 1.8 points per year.
- Holiday to care for the child. If the child is the first, then 1.8 points per year are awarded, for the 2nd child - 3.6 points per year, for the third - 5.4 points per year.
- For the time of caring for a disabled minor of 1 year, a disabled child, or a person over 80 years old, 1.8 points are added per year.
How can I find out the accumulated individual pension coefficient? There are three ways:
- Request an extract from the Pension Fund.
- Get information through the State Services portal.
- Calculate the coefficient yourself
The statement will show not only the individual coefficient, but also the cumulative amount, as well as the insurance period. But you need to keep in mind that periods before 2000. will not appear in the statement.
It is quite difficult to calculate the individual pension coefficient on your own, but it is possible. We described in detail how to do this above.
Pension Fund employees strongly recommend that future pensioners track their individual data, which will be necessary to calculate their pension. This can be done through the official website of the Pension Fund of Russia in the “Citizen’s Personal Account” section. To do this, you need to go through the appropriate registration using a certified signature from the State Services portal.
The procedure for calculating the insurance period of individual entrepreneurs and calculating pensions
It should be remembered once and for all that pension provision for individual entrepreneurs is fundamentally different from the calculation of pensions for employees. Differences can be seen in the accounting of insurance (work) experience (previously we talked about independent deductions by individual entrepreneurs), in the amount of insurance premiums and in the formulas on the basis of which future pensions for entrepreneurs are calculated. In the life of businessmen, the law provides for non-insurance periods. During such periods of time, state funds pay contributions instead of individual entrepreneurs. This time is also included in the length of service of businessmen. This is possible in the following situations:
- Military service;
- residence of spouses as military personnel in regions where they had no employment opportunities (no more than 5 years in total);
- when spouses, as employees of the diplomatic and consular departments of the Russian Federation, reside in the territory of a foreign state (no more than 5 years in total), if during this period they were not engaged in commercial activities;
- time to care for children, until each child is 1.5 years old (in total no more than 6 years);
- the period of care of an able-bodied individual entrepreneur for a disabled person of group 1, a disabled child or an aged relative over 80 years old.
Pensions for individual entrepreneurs are calculated in accordance with the norms of the Labor Code of the Russian Federation and the rules of pension legislation
As mentioned above, the amount of an individual entrepreneur’s pension is affected by the amount of his insurance contributions. The annual volume of these contributions is fixed by the legislative framework. In 2020 it is:
- for individual entrepreneurs whose average annual income is up to 300,000 rubles, the payment to the budget is 32,385 rubles;
- income over 300,000 rubles obliges the individual entrepreneur to transfer 1% of the amount of income that exceeds this amount in addition to the fixed amount. In this case, the amount will be limited to a maximum of 212,360 rubles.
Pension payments of those entrepreneurs who continue to work after retirement are not indexed. If an entrepreneur leaves work after retirement, he can count on an annual increase in pension.
Calculation of length of service for the northern regions of the Russian Federation
For the northern regions of our country, the legislation provides for special rules for calculating the length of service of the population. To receive a pension, men need to be 55 years old, women – 50 years old. In addition, they must work in the north for at least 20 and 15 years, respectively. In order for the activities of an individual entrepreneur to be included in the “northern” experience, entrepreneurs, in addition to paying insurance premiums, must provide evidence of conducting commercial activities in the relevant regions.
The northern regions of the Russian Federation have their own rules for calculating length of service and calculating pensions
The evidence is:
- tax statements about income and expenses in a given area;
- premises rental agreement;
- contracts with contractors, etc. (the evidence provided depends on the specific activities of the individual entrepreneur and may differ significantly).
Registration process
The process of applying for a pension for individual entrepreneurs is no different from what those who work for hire go through. One thing - you will have to do everything yourself, whereas in enterprises this is done by accountants.
List of documentation:
- Work book or other documents that confirm the activity;
- Passport;
- Certificate of registration of individual entrepreneurs for tax purposes;
- SNILS;
- Employment contracts;
- Necessary documents from the archive confirming the place of work, in case the contracts or work book are lost;
- Other documentation: military ID, marriage certificate, etc.
A package of documentation, including an application, is submitted to the place where the individual entrepreneur is registered. Within 10 days, the documents are checked and a decision is made whether a pension will be granted.
If everything is done correctly, the individual entrepreneur will receive payment within a month.
- Download the application to the Pension Fund for a pension here
What and how they count
Work experience for individual entrepreneurs is taken into account if the following conditions exist:
- Individual entrepreneur status has been officially issued.
- Contributions to the Social Insurance Fund are paid. They cannot be less than the minimum established by law. There are payment documents confirming payment.
- Experience as an individual entrepreneur is at least 5 years.
Legislation is constantly changing. From 2020, the length of service must be no less than 7 years, and from 2024 the law provides for 15 years.
The term “work experience” was replaced by “insurance” in 2007. It, along with other conditions, makes it possible to qualify for an old-age pension. If during the calculation they were unable to reach the required 5 years, then the person will still receive a pension, but it will be social and in the amount of 1 minimum wage.
An individual entrepreneur may not work, may not receive a profit for some time, or during seasonal work, work only for a certain time, but whether the individual entrepreneur continues to work or not depends on the payment of insurance premiums. To keep it going, you have to pay fees regardless of making a profit. To do this, when opening an individual entrepreneur, you need to enter into an agreement with the Social Insurance Fund, calculate contributions and pay them monthly.
It is imperative to retain payment documents to confirm such payments in the future.
The five-year period required to calculate the length of service to establish a pension will be counted cumulatively. For example, you can pay insurance premiums as an individual entrepreneur for several years, then work under an employment contract at some enterprise, then the employer will pay these contributions.
