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 and not insured under the Pension Insurance Act, are mandatory members of the II pillar of pension insurance.
Within one month from the date of acquisition of the status of insured person, such persons should choose a compulsory pension fund (hereinafter OMF) at any branch of the Croatian Financial Agency (FINA). The insured person submits an application to the compulsory pension fund (or a change of OMF) based on a valid identification document that has a photo (ID, passport, driver’s license) and Personal Identification Number (OIB). If they do not choose OMF within that time period, REGOS will, according to the regulations, ex officio distribute them to one of the existing OMFs (category B). Upon registration (personal choice or official schedule), the opening of the personal account of OMF member is initiated.
When registering the OMF at REGOS counter at FINA offices, you should request an ePASS to monitor the balance on your personal account, and request and receive electronic documents issued by REGOS via 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 at any FINA office 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 and only within the same retirement society, only within the same pension company and only in the calendar month in which he or she is born.
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.
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 an insured person obtains conditions for retirement, he or she selects the pension insurance company and transfers the collected funds from the pension fund in which he or she is a member. At present, the Raiffeisen Pension Insurance Company is currently operating in the Republic of Croatia which pays pension on the basis of individual capitalized savings. For persons who voluntarily applied for savings in the II pillar, the Act on Compulsory Pension Funds has foreseen the possibility to exit from the II pillar at the time of retirement, if this is more favourable to the insured person.
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 to REGOS (Gajeva 5, 10 000 Zagreb) for inheritance payment purposes 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.
Supervision of the operations of pension funds and pension insurance companies is carried out by the Croatian Financial Services Supervisory Agency – HANFA.
Existing compulsory pension funds in the Republic of Croatia
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).
Upon receiving the information from the Decision provided to the Central Registry of Insured Persons (hereinafter: REGOS) by the Croatian Pension Insurance Institute, the data from the Decision regarding the status of the future pension beneficiary are checked in REGOS. 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. Exit is checked for compulsory pension fund’s members who voluntarily entered the II pillar of pension insurance. Compulsory pension funds’ members who voluntarily entered the II pillar of pension insurance, when exercising the right to pension, have the right to exit from the II pillar and transfer the funds from their personal accounts to the I pillar, if that’s more favourable for them.
If it is established that the personal account of the future pension beneficiary is opened and that he or she has not filed the Application to exit from the II pillar of pension insurance, the “Application for the selection of pension insurance company (R-POD form)” is filed in REGOS, which shall be delivered to the future pension beneficiary in two copies, with the accompanying letter.
The R-POD form contains information on the future pension beneficiary (name and surname, Personal Identification Number (OIB), information on the compulsory pension fund in which the future pension beneficiary registered, personal account number, date of obtaining the right to pension, date of adoption of the Decision on the pension).
Upon receipt of both R-POD forms completed and signed by the future pension beneficiary, it is again verified whether the personal account is opened and whether exit has been made. If the personal account is still open and no exit was made, the R-POD form will be certified, one copy will be sent to the future pension beneficiary by registered mail and one copy shall remain in REGOS. After certification of R-POD form, the future pension beneficiary has a deadline of fifteen days if he or she wants to change his or her mind. The said deadline is defined by Article 2, paragraph 3 of the Ordinance on the selection of pension insurance company within the compulsory pension insurance (“Official Gazette” no. 99/14).
After the expiration of the said deadline, it is once again verified whether the personal account is open and whether exit has been made. After the check is carried out, following steps are closing of the personal account or issuing an order to the pension company which manages the compulsory pension fund to transfer the funds from the compulsory pension fund to the payment account for II pillar contributions.
The 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, on the next working day it will be checked if the funds have been transferred to the account of the legal recipient of funds – the Raiffeisen Pension Insurance Company which will pay the pension based on individual capitalized savings.
The Pension Insurance Company is reported 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, after the conclusion of the said contract, contribution is subsequently paid to the pension beneficiary, REGOS will transfer such funds to the pension insurance company with which the pension beneficiary has concluded a Contract on pension. In this case, the pension insurance company and the pension beneficiary will conclude an annexe to the Contract on pension which will determine the new amount of pension.