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Procedure for exercising the right to old-age/anticipated old-age pension

In the process of exercising their rights to old-age or anticipated old-age pension, all insured persons who are insured in both pension pillars are allowed to choose whether they want to receive a pension from the pillar I only or a pension from the pillars I and II by submitting a personal statement to REGOS.

Key steps to the pillar II pension:

1. Submitting an application for exercising the right to a pension to HZMO

2. Informative pension calculation

3. Pension selection

4. Choice of MOD (pension insurance company)

5. Conclusion of the contract with MOD

Submitting an application for exercising the right to a pension to HZMO

The request for exercising the right to old-age/anticipated old-age pension has to be submitted to the Croatian Pension Insurance Institute (HZMO) one month before the termination of insurance at the earliest. When the procedure determines that the conditions for the pension have been met, HZMO will first issue a decision on the recognition of the right to the pension and the payment of a pension advance (temporary decision).

You will receive the pension advance until the final decision on the pension is made, which will determine the definitive pension amount.

Upon the payment of the first definitive pension amount, you will receive the payment of the difference between the advance payment and the definitive pension amount for the entire period from the date of exercise of the right to pension until the final decision was made.

Not all data on which the pension calculation depends is available to HZMO in the period from January to March, namely the average gross salary in the Republic of Croatia for the previous year, which is necessary for calculating the value point for that year as well as the current value of the pension.

Data on the average gross salary in the Republic of Croatia for the previous year is published by the Croatian Bureau of Statistics in mid-March of the current year. HZMO Steering Committee makes a decision on the current value of the pension based on this data. After that, HZMO has all the parameters necessary for informative pension calculation.

Informative pension calculation

A future pensioner has the option to choose between having all funds from the pillar II transferred to the pillar I and retiring as if they had been insured only in the pillar I all their life, or opting for a combined pension from the pillars I and II.

REGOS collects informative calculations of pensions from HZMO and pension insurance companies (MODs) and delivers them to the home address of the future pensioner with the aim of helping them make a decision on pension selection.

Informative pension calculation contains:

  • calculation of pension from the pillar I only
  • calculation of pension from the pillars I and II
  • information on the amount of funds in the personal account with the balance on the date of the Informative Pension Calculation
  • information about the possibility of a partial, lump-sum cash payment of up to 20% of the total amount of funds in the personal account

Along with the informative calculation of the pension, REGOS also delivers a cover letter with detailed instructions on the possibilities of pension selection and the deadlines and method of choosing/changing MOD.

The informative pension calculation is only an aid in making the decision on pension selection and may differ from the final pension calculation, because the pension calculation from the pillar II is influenced by the selected form of pension payment, the date of commencement of pension payment, the amount of funds in the personal account, age and other parameters.

For the pension from the pillar II, the informative pension calculation shows the highest initial expected amount, which only applies to the individual lifetime pension.

Before making a decision, we recommend that the future pensioner be informed in detail about all forms of pension payment at MODs, because the final choice of pension cannot be withdrawn.

All stated amounts of pensions, as well as the partial lump-sum payment, are shown in gross amounts and are taxable as income from employment at the appropriate tax rates in accordance with tax regulations.

Pensions from pillars I and II are adjusted in different ways, whereby:

  • Pension from pillar I is adjusted according to the change in the current value of the pension (AVM) according to the decision of the HZMO Steering Committee, based on data on the semi-annual rate of inflation and the semi-annual change in the average gross salary of all employees in the previous six-month period, in such a way that the higher rate of change is taken in the amount of 70%, and the lower rate in the amount of 30%, and is applied on 1 January and 1 July of each calendar year.
  • Pension from pillar II is adjusted according to the inflation rate at least twice a year for the previous six-month period.

Partial lump sum payment

The partial one-time payment option is available to insured persons whose basic old-age/anticipated old-age pension from the generational solidarity pension insurance is higher than the lowest pension. The future pensioner has the option of a partial lump-sum payment of up to 20% of the total amount of funds in the personal account. The partial lump-sum payment option is available if you choose a pension from both pillars.

The partial lump-sum payment in the amount of up to 20% from pillar II must be agreed upon with MOD when concluding a pension contract, and shall be paid together with the first pension.

By agreeing on a partial lump-sum cash payment, you will permanently receive an amount of the monthly pension from the pillar II which is lower than the monthly amount of pension that you would have received if you had not used the right to a partial lump-sum payment.

Pension selection

After receiving the informative pension calculation and based on all relevant circumstances, the future pensioner should provide a Statement on Pension Selection. They can select a pension from pillar I only or a combined pension from pillars I and II.

In the case of choosing a pension from the pillar I only, the pension is determined as if the insured person had never been insured within pillar II. This does not mean that the money from the pillar II is gone but that the funds from the personal account are transferred to the state budget and the pension will be paid in full by HZMO.

In case of choosing a combined pension from the pillars I and II, the total amount of funds from the personal account shall be transferred to the selected MOD. This means that the pension will be received from two sources. MOD will pay the pension from the pillar II, and HZMO will pay the basic pension from the pillar I.

The choice of pension can be made:

  • at the counter of the Pension Information Centers in Zagreb, Split, Rijeka and Osijek
  • at any FINA branch office at the counter where REGOS operations are carried out
  • through the “Pension selection (pension only from pillar I or pension from pillars I and II)” REGOS electronic service in the e-Citizens system with the use of an electronic identity card (e-ID) with an activated signing certificate

A statement on pension selection may also be given by a proxy (natural person or law firm) on the basis of power of attorney certified by the competent authority. The power of attorney has to be sent to the address: REGOS, Gajeva 5, 10 000 Zagreb.

REGOS will submit the information on the choice of pension to HZMO, which will issue a Decision on the Recognition of the Right to Old-Age or Anticipated Old-Age Pension according to the Statement on Pension Selection.

If the insured person does not provide a Statement on Pension Selection, HZMO will not be able to make a final decision on the recognition of the right to old-age or anticipated old-age pension, and the pension will be paid according to the temporary decision.

Choice of MOD

If the future pensioner chooses a combined pension from the pillars I and II, REGOS will submit information about the type of pension chosen to HZMO, after which HZMO will submit a decision on the recognition of the right to a basic old-age or anticipated old-age pension. After that, it is necessary to select the MOD that will pay the pension from the pillar II.

There are currently two MODs in the Republic of Croatia:

  • Hrvatsko mirovinsko osiguravajuće društvo d.d. (Croatian Pension Insurance Company) (hereinafter: HRMOD) and
  • Raiffeisen mirovinsko osiguravajuće društvo, d.d. (Raiffeisen Pension Insurance Company) (hereinafter: RMOD)

The choice of MOD can be made:

  • at the counter of the Pension Information Centers in Zagreb, Split, Rijeka and Osijek
  • at any FINA branch office at the counter where REGOS operations are carried out
  • through the REGOS electronic service „Pension insurance company (registration/change)“ in the e-Citizens system

A statement on MOD selection may also be given by a proxy (natural person or law firm) on the basis of power of attorney certified by the competent authority (signature certification). The power of attorney has to be sent to the address: REGOS, Gajeva 5, 10 000 Zagreb.

A future pensioner can change their choice and choose another MOD free of charge within 15 days from the day of the first MOD selection. Upon expiry of this period, the selection of MOD cannot be changed or revoked and is considered final.

If a future pensioner does not choose a MOD within 6 months of becoming eligible for a pension, REGOS will assign them to one of the existing MODs.

Upon expiry of legal deadlines, REGOS will close the personal account and transfer the funds to the selected MOD, which will contact the future pensioner in order to conclude the pension contract from the pillar II.

Conclusion of the contract with MOD

In order to make a decision on the pension scheme choice, MOD is obliged to provide a future combined pension beneficiary with the rules of individual pension schemes, an overview of all possible pension payment options, informative pension calculations customized for the pension beneficiary, as well as related costs and other relevant information. In order to conclude a pension contract, it is necessary to submit an application and attach appropriate documentation.

If the future pensioner opts for a partial lump-sum cash payment, the amount of funds for the pension from the pillar II shall be reduced by the disbursed amount.

MOD disburses pensions from compulsory pension insurance in one of the following forms:

  • individual pension
  • joint pension disbursed to the pension beneficiary, i.e. paid for life to the spouse / common-law or life and informal life partner (hereinafter referred to by a single word: spouse) who outlives the pension beneficiary
  • individual pension with a guaranteed period, which is disbursed to the pension beneficiary, with the proviso that in the event of the death of the pension beneficiary before the end of the guaranteed period, the payments continue to be made until the end of the guaranteed period to the named beneficiary(ies) or to the legal heir(s) according to the final inheritance decision
  • a joint pension with a guaranteed period, which is disbursed to the pension beneficiary, i.e. which is paid for life to the spouse who outlives the beneficiary, and if both pass away within the guaranteed period, to the named beneficiary(ies) or to their legal heir(s) according to the final inheritance decision until the end of the guaranteed period. The naming of beneficiaries/heirs is valid only with the consent of the spouses

The amount of pension that will be disbursed to pension beneficiaries is determined on the basis of the total amount of capitalized payments of the fund member's contributions, taking into account the age of the pension beneficiary on the date of exercise of the right to pension, the type and form of pension that will be disbursed and other elements of actuarial calculations.

In certain cases prescribed by the Act on Pension Insurance Companies, it is possible to choose only certain forms of pension payment (e.g. if the future pensioner has underage children, they are obliged to name them as beneficiaries until they reach the age of 18, and in that case they can only choose forms of pension payment with a guaranteed period).

In the event that the future pensioner does not conclude a pension contract within 12 months of the transfer of funds to MOD, MOD will transfer the funds to the state budget while HZMO will determine and pay the pension as if the insured person had never been insured in the pillar II.

Information on tax calculation:

With each pension payment, as well as with a partial lump-sum payment from the total amount of capitalized funds in the personal account, MOD calculates and pays income tax in accordance with the Income Tax Act and pays the net amount to the pension beneficiary. The tax rates for pensioners are reduced and are 50% lower than the regular tax rates on income from employment.