Pension Funds
In 2002, Croatia introduced a three-pillar pension system as part of its pension reform. The first pillar allocates 15% of gross salary to fund current pensioners. The second pillar allocates 5% of gross salary, which becomes your capitalised savings for retirement. The third pillar is voluntary pension savings, where individuals choose whether and how much to contribute. Here’s how the pension pillars affect your retirement.
1. In the first pillar, based on generational solidarity, you contribute 15% of your gross salary each month towards pension contributions.
2. In the second pillar, 5% of your gross salary is contributed to a personal account in a mandatory pension fund, which you selected when you first started working.
3. The third pillar represents voluntary pension savings, where you choose how much, when, and in which voluntary pension fund you want to save.
The exception is for those who were between 40 and 50 years old at the introduction of the second pillar on January 1, 2002, who had the option to choose whether they wanted mandatory pension insurance. From your gross salary, 5% of your pension contribution is directed to a personal account in the mandatory pension fund. This money is not used to pay current pensions but is your individual capitalised savings —savings in the second pension pillar. When you retire, your pension savings from the second pillar will be paid as a supplement to your pension from the first pillar. The money in your mandatory pension fund account is your personal, inheritable asset.
Your savings are in a personal account in a mandatory pension fund
A pension management company is a joint-stock company or limited liability company that establishes and manages mandatory pension funds. The money you pay into the second pension pillar is held in your personal account in the mandatory pension fund. The total assets of the pension fund are managed by the pension company, which invests the money in capital markets with the aim of generating returns. There are:
“4 pension management companies operating in Croatia”
CATEGORY A MANDATORY PENSION FUND
Category A funds have a more liberal investment approach and are intended for younger insured persons due to the expected higher long-term returns. You may choose them if you have at least ten years before meeting the retirement conditions. A minimum of 30% of the fund’s net assets must be invested in government bonds from Croatia, EU member states, or OECD countries. A maximum of 65% can be invested in shares issued by entities in Croatia, the EU, or OECD countries, and no more than 50% in corporate bonds and commercial papers from the same regions. At least 40% of the fund’s assets must be in assets traded or settled in euros.
CATEGORY B MANDATORY PENSION FUND
Category B pension funds, with a moderate investment strategy, are designed for middle-aged insured persons. You can choose Fund B if you have five or more years until retirement. At least 50% of the net assets of Fund B must be invested in government bonds from Croatia, the EU, or OECD countries. A maximum of 40% can be invested in shares, and at least 60% of the net assets must be in assets traded or settled in euros.
CATEGORY C MANDATORY PENSION FUND
Category C pension funds are the least risky and are intended for those with fewer than five years to retirement. A minimum of 70% of the net assets of Fund C must be invested in government bonds from Croatia, the EU, or OECD countries. Investing in shares is not allowed, and a maximum of 10% can be invested in corporate bonds and commercial papers. At least 90% of the fund’s net assets must be in assets traded or settled in euros.
The 5% of pension contributions from your gross salary allocated to your personal account in the mandatory pension fund is individual capitalised savings that is not used for current pensions. This is your personal asset, as the funds are collected in each member’s personal account in the mandatory pension fund. Pensions for current retirees are paid from the first pillar, which is based on intergenerational solidarity.
Individual capitalised savings are your personal asset
This represents the gain or loss the pension fund has made on the total contributions of all its members. The return depends on the market value of the fund’s assets (e.g., bond and stock prices) and the investment policy of the pension management company.
The return is the gain or loss of the pension fund.
It is reserved for pension payments once you meet the retirement conditions. You can check your account balance in three ways:
1. By calling the fund’s free info line, where you will need your pension account number and password or PIN and your OIB (Croatian ID number). These details are provided upon joining the fund.
2. On the official website of each fund, using your pension account number, password or PIN, and OIB.
3. Via SMS updates sent by your selected fund after each contribution payment, which you can opt for during or after joining the fund. A member who opts to receive notifications via SMS will be informed of any changes in their account balance following each contribution payment.
Pensions from the second pillar are paid out by pension insurance companies. Pension calculators are available on the websites of Raiffeisen Pension Insurance Company and Croatian Pension Insurance Company (HRMOD).
PENSION CALCULATOR OF THE CROATIAN PENSION INSURANCE COMPANY
PENSION CALCULATOR OF THE RAIFFEISEN PENSION INSURANCE COMPANY
Pension savings in the second pillar are used solely for pension payouts and are legally protected from foreclosure, bankruptcy, or liquidation of the fund or the fund’s custodian bank. If the member does not live to see retirement and no family member qualifies for a survivor’s pension, the capitalised funds become part of the deceased member’s inheritance.
Pension savings in the personal account are protected from foreclosure
. This also applies to tradespeople, farmers, or those with independent activities. You can join with your ID card at any REGOS counter or online. If you don’t join on your own, REGOS will automatically allocate you to one of the funds.
Upon your first employment, you have one month to choose a pension fund.
Should you choose to change your fund within the first year, an exit fee of 0.8% of the value of the assets in your personal account will apply. For an exit during the second year of membership, the fee is 0.4%, and in the third year, it amounts to 0.2% of the value of the assets in your personal account. The exit fee is calculated based on the value of the funds in your compulsory pension fund personal account. You can change your compulsory pension fund by presenting your ID at the REGOS counter at the Financial Agency or online.
You can change your mandatory pension fund at any time.
This can be done online via the REGOS website or at the REGOS counter at the Financial Agency office with your ID card. Each member can select category A, B, or C within their compulsory pension fund without incurring a fee. However, there are restrictions based on the number of years remaining until your retirement. Members with ten or more years until retirement can choose between categories A, B, and C. If you have between five and ten years until retirement, you can choose between funds in categories B and C. Members with less than five years until retirement can only select the least risky fund in category C.
You select the fund category based on how many years you have left until your retirement.
For sick leave up to 42 days, contributions are paid by the employer, while for sick leave exceeding 42 days, the Croatian Health Insurance Institute assumes responsibility for pension contributions. If you become unemployed and without a salary, you are not obliged to make pension contributions until you find a new job. All funds accumulated until then remain in your personal account with the compulsory pension fund, and the aim of the fund is to generate returns on that money. When you are re-employed, your new employer will continue to make pension contributions. Contributions for the second pillar are paid into the personal account of the compulsory pension fund you previously selected.
If you become unemployed, you are not obligated to make pension contributions.
. In the event of the death of a compulsory pension fund member, and provided no family members are entitled to a family pension under the Pension Insurance Act, all assets in the personal account of the compulsory pension fund become part of the estate.
Pension savings in the fund are your personal property.
Compulsory pension funds do not disburse money directly to heirs; instead, it is transferred to a transitional account at REGOS as directed. From this account, the funds are disbursed to the heirs. All inheritance documentation must be submitted to: REGOS, Gajeva 5, 10000 Zagreb.
All assets in the personal account within the pension fund are inheritable.
You will enter into a pension payment agreement with the pension insurance company, which can be for a single or joint pension, either standard or early.
Pensions from the second pillar are paid by the pension insurance company.
Data is available for all four compulsory pension fund management companies and for all fund categories. You can also view an archive of unit values by fund for the past five years. Each unit of account represents a proportional share in the net asset value of the pension fund. The total value of all units of account across all fund members’ accounts is the total value of the fund’s assets.
You can track the value of your pension fund assets daily.
HANFA monitors whether all compulsory pension funds operate in accordance with the laws. Compulsory pension funds are required to submit an annual report on their activities, which must be approved by the Government and the Croatian Parliament.
HANFA oversees the operations of all pension funds.a