Voluntary pension insurance - description, system and functions

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Compulsory pension insurance guarantees the realization of certain rights of both citizens of the Russian Federation and foreigners who live in our country. Voluntary pension insurance is an addition to the mandatory one due to the lack of effectiveness of the latter in guaranteeing the material interests of any social groups of the population. What can all this mean? Let's look into this issue in more detail.

Positive aspects of voluntary insurance

If it were absent, then the elderly citizens of our country would have had a hard time. The fact is that the majority of state pensions are very small, and it is not possible to live comfortably on such money. Voluntary pension insurance is promising if the amount of a citizen's payments to the pension fundsmall or absent in principle: if there is no labor income, with entrepreneurial activity that is not officially registered, with gray salaries, etc. What is the essence of this concept? How is it different from mandatory? This will be discussed further.

Basic definitions

Voluntary legal relations for compulsory pension insurance is a system of accumulation of funds that form the future pension through various financial organizations. It is based on principles that are similar to those used in compulsory insurance. Voluntary insurance requires the will of both parties. It is based on an agreement, according to which the procedure and amount of insurance premiums are established not by the state, but directly by the citizen who is interested in receiving a good pension.

Voluntary pension insurance supplements compulsory insurance. At the same time, various kinds of insurance and financial organizations accumulate money. Extra-budgetary funds have nothing to do with the formation of funds. Voluntary insurance is guaranteed to provide a citizen with decent material benefits in old age. Since the pension has a minimum fixed amount, it makes it impossible to live a full life and to satisfy one's own needs of a citizen of retirement age. Of course, there are exceptions to this rule, but they are rare. Therefore, voluntary insurance was created as a supplement tomandatory. Under this type of insurance, the insured person is guaranteed worthy payments in old age, regardless of the size of the labor pension that he has accrued.

Insurance experience outside Russia

The method of combining two types of insurance is quite widely used in Britain, Canada, France, Germany and the United States. That is why all the working people of our country dream of the pensions of the workers of these countries. Thanks to contributions to voluntary pension insurance, American and Western European pensioners do not feel the need for anything and can afford to travel around the world. This allows each employee to independently choose an insurer with suitable insurance conditions and tariffs. Voluntary insurance guarantees economic stability to every citizen in old age, regardless of the influence of external factors or the state of the state budget system.

Pension insurance functions

Compulsory and voluntary pension insurance perform important functions and allow:

- Allocate funds to insured persons for supplementary pension payments.

- Accumulate pension contributions in the Pension Fund, voluntary insurance has the features of accumulating funds in NPFs and insurance companies.

- Control the full and regular payments of funds to the participants of the agreement.

- Redirect pension savings to other funds according tocontributors' statement.

General meaning of pension insurance

Pension funds are accumulated thanks to contributions made by the insured person under a voluntary insurance contract. Based on the contributions paid during a certain period, the amount of payments is formed if an insured event occurs, that is, the retirement age is reached. This is called an additional pension. The duty of the insurer is timely and complete control of the fulfillment of obligations by the insured person to pay premiums.

If the undertaken obligations are not fulfilled, including also non-payment of the required savings to the citizen, liability is provided in our country. The activities of insurance companies and non-state pension funds for the provision of voluntary pension insurance services in the Russian Federation are very tightly controlled. However, there is no need to get hopeful, since there are a large number of fraudulent schemes in the insurance market. That is why, before trusting your own savings to one or another fund, you need to carefully analyze the information available about it.

Who is the subject?

For this type of insurance, the insurers are: non-state pension funds (or NPFs), as well as insurance companies. NPFs are non-profit organizations whose task is to provide voluntary insurancemembers of a non-state fund. Any natural person can be considered insured if a pension contract is concluded in his favor. It can also be a member of the NPF, regardless of citizenship. The depositor acts as the insured in such legal relations. It is a person who pays insurance premiums either in favor of a pensioner of the fund, or in favor of a participant. Contributors can be:

- an individual (both a citizen of Russia and a foreigner);

- registered in our country or a foreign legal entity;

- structures of the executive branch of government.

An individual who is a member of several fund organizations at once can be considered a pensioner and participant. However, this rule does not apply to contributors.

Features

When concluding an agreement, you must be very careful. Most often, the contract is presented in the form of a standard form, however, if something does not suit the client or some things are incomprehensible to him, it is necessary to clarify all existing questions.

The contract of voluntary pension insurance always clearly states the recognized insured event - this is the achievement of retirement age by the insured person. In addition, the frequency and amount of funds contributed are stipulated. Most often, the initial payment ranges from nine to twenty-five thousand rubles. After that, the payment can vary from two hundred to a thousand rubles a month. Some programs allow you to make quarterly payments, that is, once every six months or a year.

Another important detail is the possibility of drawing up such an agreement not only for yourself, but also for another person, whether it be a familiar citizen or his relative. Thus, in the event of an insured event, the person specified in the agreement will receive an increase in pension.

Is it possible to suspend the agreement?

Voluntary pension insurance contract is terminated if the following situations occur:

- the fulfillment of the conditions specified in the agreement ends;

- the insured person dies;

- liquidation of a legal entity that is a contributor in corporate type insurance;

- in case of unforeseen circumstances stipulated in the agreement;

- upon termination unilaterally, if the customer stops paying insurance premiums;

- by agreement of the parties;

- in a judicial proceeding, if the fulfillment of the conditions prescribed in the contract is violated.

Generally speaking, the depositor has the right to demand termination of the contract after its conclusion. However, the agreement itself loses its force not less than three months after the corresponding application was submitted. In addition, the depositor, by submitting an application, may request a change in contractual conditions, while the obligation of the insurer is to consider it.

What is the difference between voluntary and compulsory insurance?

Voluntary pension insurance has the following differences from mandatory:

- guaranteed by agreement of the parties, not by the state;

- requires the will of the participants, and is not mandatory;

- makes it possible to choose the order of payments and tariffs, while for compulsory insurance they are established on the basis of current legislation;

- the policyholder can independently choose the company that will accumulate his pension funds, in contrast to the mandatory one, where contributions are paid to specific off-budget funds;

- NPFs form their budget from investment income and contributions from individuals and legal entities, while the budget of state funds is created from contributions from employers and individuals who are engaged in specific activities;

- more important for voluntary insurance is the insurance scheme, and for compulsory insurance - the percentage for the tax base and the tariff.

Voluntary insurance in the pension sector is additional to voluntary entry into compulsory pension insurance, so the main payments under such an agreement are called supplementary pension.