The pension system in Croatia is reformed into the mixed - public/private system which is based on the three pillars scheme.
1st Pillar: Pay as you go (PAYGO) system financed by contributions and state budget revenues.
The first pillar mandatory pension fund is the responsibility of the Croatian Institute for Pension Insurance. All employees are obliged to pay 15% of their total monthly income into the fund. The protection of the beneficiaries is provided in the form of a minimum pension (guaranteed right), and restriction in the form of a maximum pension.
The acquisition of all first pillar pensions depends, in addition to age conditions, on the length of qualifying (mostly insurance) periods completed.
2nd Pillar: Compulsory pension insurance based on individual capitalized savings.
The second pillar is mandatory for persons who were under the age of 40 in 2002 and is additional to the first pillar. Persons who were aged between 40 and 50 in 2002 were able to opt out. Those who did, as well as people older than 50 in 2002 remained insured only under the first pillar, but their contribution equals 20% of gross salary, thus ensuring equality. For those insured under both pillars, the extra 5% of total contribution (additional to 15% paid under the first pillar) is directed to the second pillar funds (a private pension fund).
3rd Pillar: Voluntary pension insurance based on individual capitalized savings.
Open to all citizens since March 2002. Every person residing in Croatia can be insured under the 3rd pillar.