Valorization refers to measures carried out by the state aimed at revaluing or increasing the value of goods, currency, pensions, securities, social payments and other capital.
In 2009, the term is used in Russian law in connection with the valorization of pension rights, which is reflected in a number of federal laws.
What does this concept mean? This is a common question. Let's take a closer look in this article.
Valorization is the revaluation of the monetary value of a pension right that was acquired by citizens before the 2002 reform. Such a procedure is carried out in respect of any insured persons who had experience prior to January 1, 2002. Simply put, it already applies to all current retirees, and, in addition, the Russians who worked at any time until 2002 as they retired.
Let us examine the question that this is the valorization of pensions.
Basic concepts
Its purpose is revaluation. Today, the calculation of providing for the elderly is carried out differently - without taking into account past factors. Since 2002, accruals have changed dramatically. Today, points are taken into account, which are formed at the expense of contributions paid by the employer. Considering that before the start of economic reforms, and, in addition, during the Soviet period, insurance premiums did not exist in principle, reevaluation is required for the entire working period until 1991.
How does a pension increase for working retirees?
Who is eligible for recalculation?
Valorization of pensions affects everyone who was officially employed directly prior to 2002. This procedure is carried out and fully controlled by the Pension Fund. True, the process is automated and does not require applications. Valorization of the pension in the current year involves a recalculation in the direction of its increase.
Employees recalculate based on the information available in the database for each person. In the event that an elderly citizen has papers that may affect the size of the pension, they must be brought to the fund. Such papers can serve as a certificate of employment along with copies of employment contracts.
That this is the valorization of pensions is now clear.
What is taken into account when calculating pension payments?
The recalculation procedure takes into account all of the following parameters:
- The amount of pension capital until 2002.
- Total duration of employment until 2002.
- Seniority in Soviet times before the onset of 1991.
- The presence and number of individual points.
Pension Type Differences
Valorization is a recalculation that is provided exclusively for labor payments. This does not apply to social or state contributions. So, the general principles are different for each type:
- Pension in view of reaching the required age. Due to a certain age, pension capital is taken into account.
- Pension due to loss of breadwinner. In this case, consider the pension capital of a deceased person who was the holder.
- Military pension. Within this category, part of the insurance coverage that has been acquired since 2008 is taken into account.
- Chernobyl residents who receive early payments. In this case, valorization is valid for the insurance part of available capital.
- Civil servants.
Pension Calculation Algorithm
How is valorization calculated? More on this later.
The Pension Fund reevaluates by accruing the amount necessary for payment to each person without receiving additional applications. True, you should understand the basic principles of calculation in order to be able to calculate your own size of collateral and compare it with the actual indicator. The accumulated experience plays a particularly important role for valorization. As part of the definition of valorization in 2017, the following rules work:
- Determine the capital of pensioners for the period until 2002.
- This period is affected by interest. For example, ten percent is added for having an official place of employment until 2002.
- For every twelve months worked up to 1991, one percent is added to previous periods.
For example, when a person worked for fifteen years before the collapse of the USSR, twenty-five percent is applied to capital. This means that increasing pension to working pensioners is carried out precisely by this amount. But it should be emphasized once again that there is a valorization of pension capital before the onset of 2002. For the rest of the time, money equivalent ratios are assigned. In this case, the points are multiplied by the price annually approved by the Government of Russia. As part of calculating the final amount, pension capital is multiplied by interest for the accumulated experience, as well as the total indexation coefficient.
Valorization Dates
Valorization is a very important process in the economy. The total coefficient of all indexations that were carried out is a value of 3.6. The waiting period itself is determined by the date of termination of professional activity.
In general, the valorization procedure is designed to increase the pension rights of citizens obtained before the establishment of new laws, taking into account points. Persons who worked under the USSR for any time receive an increase according to the above algorithm. Valorization is aimed primarily at increasing the provision of senior citizens so that it does not fall below the subsistence level.
What explains the need for valorization?
Until 2002, the calculation of the amount of valorization was carried out according to the following indicators:
- Citizen's choice of salary for any five years.
- Total work experience.
In 2002, it was decided to add the employer deductions to this list. In this form, the system functioned until 2014, when innovations arose in it in the form of accumulated points for the period of labor activity. An analysis of the accumulation system found that until 2002 there were no insurance premiums per se, and for this reason the pensions of older people suffered too much in size.
In order to equalize the rights of pensioners for whom they accrued pensions in the Soviet period with current standards, the Russian government adopted a resolution on the valorization of pension capital.
The federal law introduced the necessary changes on its large-scale implementation, which began to be implemented on January 1, 2010. Thanks to this, the capital of future as well as actual retirees began to increase.
A noticeable increase was felt by those citizens who had a great experience until 2002. For people who retired from 2010 to 2014, valorization was almost imperceptible. This is because the increase was included in the amount of payments within the framework of accrual automatically. We clarified that this is valorization.