The II pillar of pension insurance refers to compulsory pension insurance on the basis of individual capitalized savings of part of pension contributions, and is mandatory for all insured persons under the age of 40 who are insured within the compulsory pension insurance system based on generational solidarity under the Pension Insurance Act. Insured persons are obliged to insure themselves in the pension fund that they choose and thus, while respecting their choice of categories, they become members of the pension fund in accordance with the provisions of the Act on Compulsory Pension Funds.
According to the Act on Compulsory Pension Funds, a compulsory pension fund is established by a pension company that manages such fund on its behalf and for the joint account of pension fund members. Pension fund may fall under categories A, B or C, and the said categories are managed by the same pension company. Pension funds of different categories have different investment strategies and vary according to membership limitations (with regard to their life expectancy), investment strategy and investment limitations. The assumed risk should be the lowest in category C funds, and the largest in category A pension funds.
Compulsory pension fund registration
All persons who for the first time acquire the status of insured persons after 1 January 2002 (on the basis of employment, other income – “royalties”, self-employment, remuneration etc.) and are less than 40 years old are mandatory members of the II pillar of pension insurance.
Within one month from the date of acquiring the status of an insuree, these persons need to choose a mandatory pension fund (hereinafter OMF) in any branch of the Financial Agency (FINA) at the counter where REGOS operations are performed, at the counter of the Pension Information Centres in Zagreb, Split, Rijeka and Osijek or via the REGOS e-service “Mandatory pension fund (registration/change)” in the e-Građani system.
The insuree at the counter performs registration in the OMF (or change of the OMF) on the basis of a valid identification document that has a photograph (identity card, passport, driver’s license) and Personal Identification Number (OIB). Insurees who do not choose their mandatory pension fund within the prescribed period, REGOS will ex officio assign to the OMF category A managed by one of the following pension insurance companies:
PBZ CROATIA INSURANCE – mandatory pension fund managment company
Allianz ZB – mandatory and voluntary pension fund managment company
Raiffeisen – mandatory and voluntary pension fund managment company
ERSTE – mandatory and voluntary pension fund managment company
Upon registration (personal choice or official schedule), the opening of the personal account of OMF member is initiated.
When registering with OMF at the FINA office at the counter where REGOS activities are performed, request an ePASS so that you can monitor the balance on your personal account and search for and obtain electronic documents issued by REGOS via the Internet.
20% of funds from the insured person’s gross salary (from the basis for contributions calculation) goes to pension insurance each month, in a way that 15% of the funds are paid to the Croatian Pension Insurance Institute (I pillar) and 5% to the personal account of the insured person in the compulsory pension fund (II pillar).
REGOS allocates the collected contributions funds in the amount of 5% of gross salary for compulsory pension insurance based on individual capitalized savings to the compulsory pension fund (OMF). If a member of the OMF ceases to pay contributions to the pension fund, he or she remains a full member of the OMF to which he or she had paid contributions. An insured person can only be the member of one OMF and may have only one account in the fund.
The system is completely transparent because the insured person at any time knows how much funds he or she has on his or her personal pension account in the OMF.
Change of compulsory pension fund
Change of compulsory pension fund can be made in the same way as OMF registration. The following fee is charged when changing the OMF, according to the provisions of the Act on Compulsory Pension Funds:
- In the first year of membership in the OMF, the fee amounts to 0.8% of the amount in the OMF member’s personal account,
- In the second year of membership in the OMF, the fee amounts to 0.4% of the amount in the OMF member’s personal account,
- In the third year of membership in the OMF, the fee amounts to 0.2% of the amount in the OMF member’s personal account,
After three years of continuous membership in the same OMF, the change of OMF is free of charge.
A member of the OMF may change the fund’s category once a year within the same pension insurance company in their birthday month without paying a redemption fee.
A member of the OMF may transfer to a pension fund of the same category managed by another pension company if more than 14 days have passed since the previous change of the pension fund, regardless of whether the previous change resulted from the change of pension fund with regard to the category managed by the same pension company or the change of pension fund managed by another pension company.
Compulsory pension fund (registration/change)
The new Regos electronic service Compulsory Pension Fund (OMF) (registration/change) is available from April 26, 2019.
The service includes the registration or change of the compulsory pension company and compulsory pension fund category through the internet.
From previous experience, it has been established that the Central Register of Insured Persons (hereinafter: REGOS), allocates over 95% of the insured persons in the compulsory pension fund (OMF) ex officio. In order to accelerate and simplify the registration/change process of compulsory pension company (OMD) and fund category, through the upgrade of the existing electronic services within the e-Citizen system, REGOS has enabled the “Compulsory Pension Fund (registration/change)” service with the application of the advanced electronic signature.
The level 4 security (eOI) credential users who meet the statutory requirements for registration/changing of OMD and OMF categories have the right of access to the service.
This service includes:
- Selection/change of OMD
- Selection/change of OMF category
- Cancellation of selection/change of OMD and OMF category
- Download of signed forms (PDF format)
Insured person’s personal account
Personal account is opened by personal registration with the selected pension fund or by official scheduling of the insured person carried out ex officio by REGOS. The personal account records the contributions paid and all changes in the personal property of the pension fund’s member during the period of individual capitalized savings. Personal accounts are kept in the units of account, a value that is for each day of valuation determined by the pension company managing the member’s compulsory pension fund. REGOS publishes the value of the unit of account on its websites and runs single accounting of personal accounts of the members of pension funds.
The status of a personal account can be checked through the website.
For this you need an ePASS credential obtained personally, by showing your ID card and Personal Identification Number (OIB) at FINA offices throughout Croatia.
If a member of the OMF notices that the balance on his or her personal account is different from the expected, there are several possible reasons for this, and for further clarifications he or she should first contact his or her employer in order to check if the employer has duly calculated and paid compulsory contributions for the II pillar, or in due course, submitted the correct form with debits (JOPPD), without which it is not possible to record funds in personal accounts.
In the event that all of the above is performed correctly and the problem still exists, the insured person can contact REGOS for further information at the phone number +385 (1) 4898 999 or by e-mail to firstname.lastname@example.org.
Funds on the personal account of a pension fund’s member are personal property of that member. The right to receive funds from the OMF’s personal account cannot be used until retirement. Contributions paid into the pension fund, as well as transferred accounts, are recalculated into units of account representing proportional shares of the net asset value of the pension fund. The total value of all units of account of the pension fund is always equal to the net asset value of the pension fund.
When they acquire the conditions for a pension, the insurees select a pension insurance company and transfer the funds collected from the pension fund of which they were a member until then. Currently, the Raiffeisen Pension Insurance Company and the Croatian Pension Insurance Company operate in the Republic of Croatia, paying pensions on the basis of individual capitalised savings (pension from the II Pillar).
Inheritance of total capitalized funds from personal accounts
If a member of OMF dies before obtaining the right to pension, and family members do not have the right to survivors’ pension under the Pension Insurance Act, the total capitalized funds on the account of deceased member of OMF are subject to inheritance under the Inheritance Act.
The documentation to be submitted for payment of inheritance to the address of the Central Register of the Insured Persons (hereinafter: REGOS; Gajeva 5, 10 000 Zagreb) is as follows:
- Original or certified copy of the final decision on inheritance stating the II pillar funds, issued by the competent court / public notary in the Republic of Croatia
- Application for inheritance payment
- Confirmation of the bank on the IBAN construction of the successor’s account
Application for inheritance payment may be submitted to REGOS in free form and must contain the following elements: name and surname of the deceased person, Personal Identity Number (MBG/OIB) of the deceased person, the applicant’s name and surname, the applicant’s Personal Identification Number (OIB), IBAN account number of payment receiver, the date of application filing, and must be signed in person.
Existing compulsory pension funds in the Republic of Croatia
Supervision of the operations of pension funds and pension insurance companies is carried out by the Croatian Financial Services Supervisory Agency – HANFA.
EXERCISING THE RIGHT TO PENSION AND ON THE BASIS OF INDIVIDUAL CAPITALIZED SAVINGS
The right to pension and based on individual capitalized savings – II pillar is realized on the basis of the Decision on Retirement Benefits issued by the Croatian Pension Insurance Institute (hereinafter: HZMO).
From January 1, 2019, all insured persons who are insured in both pension pillars can, when they apply for old-age or early old-age pension select whether they want to receive pension only from the I pillar (generational solidarity) or pension from I and II pillars (individual capitalized savings) through a personal statement to the Central Register of Insured Persons (REGOS).
In order for a member of the fund to choose a more favourable pension, REGOS will collect informative pension calculations from the Croatian Pension Insurance Institute (HZMO) and the Pension Insurance Company (MOD) and submit them to the home address.
If a member of the fund opts for pension only from the compulsory pension insurance on the basis of generational solidarity, the HZMO will determine the pension as if the insured was only insured in the I pillar. The selection of this pension means that a member of the fund wants to leave II pillar, i.e. compulsory pension insurance of individual capitalized savings, and the total capitalized funds from the personal account of the member of the fund are transferred to the state budget.
If a member of the Fund opts for a combined pension from I and II pillars HZMO will determine the basic pension from compulsory pension insurance for generational solidarity and submit to REGOS the data from the Decision.
The data from the Decision are verified in REGOS, regarding the status of the future pension beneficiary. It is checked whether the personal account of the future pension beneficiary is opened and whether he or she has exited from the II pillar.
As of 01 January 2019, the fund members who voluntarily joined the II pillar have the right to leave the II pillar by obtaining a Certificate of the Croatian Pension Insurance Institute (HZMO) confirming that they exercised their right to a pension by 31 December 2018 in a procedure that has not been finalised yet.
After the Croatian Pension Insurance Institute submits the Decision on the recognition of the right to a basic pension, the selection of the pension insurance company is performed:
- at the Pension Information Centres in Zagreb, Split, Rijeka and Osijek,
- at any FINA office at the REGOS counter, or
- via the electronic service “Pension Insurance Company (application/change)” in the e-Građani system with the use of an advanced electronic signature. The right to access to the service have the users of the electronic identity card e-OI who meet the prescribed conditions for registration/change of the pension insurance company.
The insuree performs the registration/change of the pension insurance company at the counter with the presentation of an identity card.
After selecting the pension insurance company, REGOS will close the personal account of the member of the Fund and transfer the overall funds to the pension insurance company which will contact than the beneficiary for the conclusion of the pension agreement.
The compulsory pension company that manages the compulsory pension fund has a deadline of five working days from the date of initiating the closing of the personal account to allocate funds to the payment account for II pillar contributions.
Upon settlement of the obligation by the custodian bank, it is verified the next working day whether the funds have been transferred to the account of the legal recipient of funds – pension insurance company (MOD) that will pay a pension based on individual capitalized savings (Pillar II pension).
REGOS informs the Pension Insurance Company electronically on the data from R-POD form and the amount of transferred funds. Upon receipt of the aforementioned information, the pension insurance company will contact the future pension beneficiary regarding the conclusion of the Contract on pension based on individual capitalized savings.
If a contribution is subsequently paid to the pension beneficiary after the conclusion of the Pension Agreement, REGOS shall forward these funds to the pension insurance company with which the pension beneficiary concluded the Pension Agreement. In that case, the pension insurance company will determine a new amount of pension for the pension beneficiary.
If the base pension from the pension insurance of generational solidarity is higher than 15% of the minimum pension from the I pillar according to the Pension Insurance Act, the future pension beneficiary from II pillar can decide on a partial, one-time cash payment of 15% in the gross amount of the total capitalized funds allocated to MOD. Partial one-time payment to the beneficiary of an old -age and early old-age pension is paid by the MOD on the basis of the concluded Pension Contract.
At each pension payment, as well as a one-time payment of 15% of the total capitalized funds allocated to MOD, the pension insurance company calculates and pays income tax and surtax on income tax in accordance with the Income Tax Act and pays the net amount to the pension beneficiary. Tax rates for pensioners are reduced and are 10% and 15%, depending on tax brackets. Based on the final income tax calculation that is done by the Tax Administration, the pension beneficiary may be required to pay a tax or may be entitled to a refund of overpaid income tax, depending on the received receipts and the personal deductions used in that year.
OFFICIAL ALLOCATION TO A PENSION INSURANCE COMPANY
REGOS allocates a compulsory pension fund member who does not select a pension insurance company within six months of acquiring rights to pension, by allocating all members in one month who have not chosen a pension insurance company equally to all pension insurance companies.