A lot of people think about how they will live in old age. Moreover, there is a tendency that young people are primarily looking for information about this, trying to understand whether there will be enough received amounts for life or if it is necessary to take any steps to increase their own well-being right now. Naturally, the first thing people start looking for information about is the insurance part of the pension. What is this part, why insurance? It is understood that retired people are insured against disability, as they can no longer provide for themselves.
All their life before that they make insurance payments (deductions to the Pension Fund), as a result of which they live upon reaching a certain age. Such a system successfully works in most civilized countries, while no one forbids people to save up for a comfortable old age by any other legal means.
Pension insurance part: what is it?
If we delve deeper into this issue, it turns out that since the beginning of this year, deductions are no longer divided into two parts, as it was before, and all payments (unless otherwise indicated) are sent to the insurance account. That is, in the course of labor activity, part (a certain percentage) of wages is sent to the Pension Fund, which accrues a certain number of points (depending on the amount received).
After the retirement age, these points are converted into a certain amount (again, depending on the total number of points), and the funds that the pensioner will receive on a monthly basis are already calculated. This system is much more convenient than the one that existed before, since now both the amount of contributions to the PF and the total insurance experience. This means that the more a person has worked in his life, the more he will receive in old age.
The funded part of the insurance pension
Previously, the pension was divided into insurance and funded parts. Now the entire amount of the payment goes exactly to the insurance. However, every citizen, if he has such a desire, can transfer a certain amount of money to be transferred to a savings account. Its advantage is that these funds can be managed (although they cannot be removed until retirement age).
That is, instead of just accumulating in the Pension Fund, they will work for the citizen, constantly increasing his future income, which he will receive in old age. This system has both advantages and disadvantages. It should be noted that the insurance part of the retirement pension (in fact, like any other) cannot be lower than a certain level. This means that only a strictly fixed amount can be sent to the funded part, which will change every year.
Payouts
The funded and insurance part of the pension is paid to the citizen in some situations, which may have nothing to do with reaching a certain age (this is the most common, but not the only option). Payments may occur due to loss of the breadwinner or disability of the insured person. To receive this money, a person must reach the age of 55 years (for women) or 60 years (for men), have a total insurance experience of more than 15 years and accumulate at least 30 points during this time (this is not difficult for such a long period).This law will come into force only in 2025, and before that, the number of required points, starting from 6.6 will gradually increase every year, as well as the required work experience, which in 2015 is only 6 years. Read more about this below.
Sizes and calculation of pensions
To determine the amount of funds that a citizen will receive every month after retirement, the following formula is used: Insurance payment = (fixed amount x premium coefficient) + (number of points x premium coefficient x fixed amount on the date of payment). This calculation can be used both to determine the amount guaranteed by the insurance part of the pension, and for its funded option.
The premium coefficient is a certain bonus to the payment that a citizen receives who continues to work even after he has reached the age allowing retirement without registration. That is, the more it works, the more it will receive as a result. The insurance part of the labor pension, which is the most common of all its types, also receives a similar “bonus” from the state.
Differences between insurance and funded pensions
Each citizen can decide to deduct the amount determined by law not to the main (insurance) pension, but to the funded one. This is not a mandatory requirement, but simply an opportunity for those who wish to manage their retirement funds. Citizens who do not want to do this will receive their usual payments in old age and not worry about anything. However, for people who are knowledgeable in financial transactions and are able to get profit from risky investments, the state provides for such an opportunity.
A citizen can place the entire amount of the funded pension in any non-state pension fund at his own discretion and thereby possibly receive more income in the future. Despite the fact that the funded and insurance part of the pension is accrued in parallel, if the funded part is lost for one reason or another (meaning if this happens due to the fault of the owner of the funds), it will not be reimbursed. So all operations with invested funds are performed by a citizen at your own peril and risk.
Social payments
This type of pension is granted to citizens who have not worked the due date, and therefore do not have the opportunity to apply for a retirement pension. The insurance part of the pension, as well as the funded, is not taken into account in this option, since the social payment is fixed in nature, independent of anything other than legislative norms. Due to the fact that until 2025 the requirements for receiving a retirement pension will be somewhat reduced, there is a great chance for many segments of the population to try to get it, and not the reduced social option. It should be borne in mind that social payments begin to be paid somewhat later than usual (from 65 for men and from 60 for women).
Early retirement pension
Some categories of citizens who have worked under difficult conditions for a long time have the opportunity to retire before retirement age. Mining workers, naval personnel, public transport drivers, medical workers, people from certain creative professions and teachers are entitled to this. The size of the insurance part of the pension, like other calculations, is completely identical to the standard used for the majority of the population.
Individual Pension Ratio (IPC)
From the beginning of this year, it replaces the pre-existing contribution to the insurance part of the pension and to the funded one. Now, all the labor activity of an individual person, which is included in the length of service, will be evaluated in points. Each point is an expression of a fixed amount that the government determines each year. To retire this year, you need to accumulate at least 6.6 points and have an insurance guard for more than 6 years.Every year, these requirements are increasing, and already in 2025 the minimum number of points should be 30, and the insurance experience should be at least 15 years.
In fact, the government completely reformed the pension program, starting from scratch, which in the next 10 years will greatly facilitate the possibility of retirement for many segments of the population. It should be borne in mind that points are awarded not only during work. So, the year of military service, caring for a child, a disabled person, etc., is regarded as 1.8 points. At the same time, care for the second child is already at 3.6 points, and for the third - 5.4 points. There are limitations. You cannot score more than the number of points indicated by the government in a year (this number will increase every year over the next decade).
What happened before?
In the previous year (and earlier), payments to the Pension Fund were divided into two parts, and the funded and insurance part of the pension consisted of them. It is not difficult to determine how many percent was spent on each of them, since this information is in many open sources. In short, the insurance part accounted for 16% of the 22% transferred to the Pension Fund, and the accumulative - the remaining 6%.
Such a system worked quite successfully, however, due to the increasing incidence of fraud among NPFs and due to the fact that the majority of the population was in no hurry to take advantage of the available opportunities, it was decided in 2015 to partially reform the existing system in the direction of improving it. It will be possible to understand exactly whether the situation really improved, whether the reforms helped or not, not earlier than in a year, and we will see all the benefits only in ten years.
What will happen now?
Summing up everything written above, we can conclude that such a thing as the size of the insurance part of the pension does not exist at the moment, since contributions are no longer divided into any separate parts and are not separately insurance and separately funded.
Despite the reforms and changes in pension system any citizen can voluntarily consciously reduce the number of points that make up the insurance part of the pension, and transfer them to the funded part in order to obtain some income. In this case, the insurance part of the pension (or simply insurance pension) will in any case be more than the funded one, so a citizen should not be left without a livelihood even in the most negative situation.
