You may receive pension benefits from Pillar 2 after becoming entitled to a Pillar 1 pension paid by the Croatian Pension Insurance Institute (HZMO). The type of pension is determined by way of a HZMO decision, as follows:

• Old age or early old-age pension

• Disability pension

• Survivor's pension

Once you have learned about your pension type, you will opt for one of the following HRMOD payment models:

NO GUARANTEE PERIOD

Klasik

• It enables you to receive a pension for life without naming a beneficiary or heir.

Partner

• A pension that you can choose if you have a married/common-law or life partner. The pension is paid to you and your surviving partner for life.

WITH GUARANTEE PERIOD

Klasik plus

• It allows you to receive a pension for life with the appointment of beneficiaries/heirs who can, after your death, exercise the right to payment in monthly annuities until the end of the period you choose. Pension payment is guaranteed for a period of at least 5 to as many as 30 years.

Partner plus

• A pension that you can choose if you have a married/common-law or life partner. In addition to the fact that the pension is paid to you and, after your death, to your partner for life, by choosing this model you can name beneficiaries/heirs to whom the pension can be paid in monthly annuities until the end of the guarantee period you choose. In this way, you ensure the payment of a pension from a minimum of 5 to even 30 years.

ONE TIME REFUND

Direkt

• Your pension is paid for life. In the case of the remaining amount of the remittance after your death, a one-time payment of that amount to your heirs is ensured.

Direkt plus

• A pension you can choose if you have a married/common-law or life partner. The pension is paid to you and your surviving partner for life. In the case of the remaining amount of the remittance after your and your partner's death, a one-time payment of that amount to your heirs is ensured.

1. Single Lifelong Pension (MO-S1)
2. Single Lifelong Old-age/early old age pension with a guarantee period (MO-S2)
3. Joint Lifelong Pension (MO-S3)
4. Joint Lifelong Pension with a guarantee period (MO-S4)
5. Single Lifelong Pension with payment of the remaining remittance amount (MO-S5)
6. Joint Lifelong Pension with payment of the remaining remittance amount (MO-S6)

You may receive pension benefits from Pillar 2 after becoming entitled to a Pillar 1 pension paid by the Croatian Pension Insurance Institute (HZMO). The type of pension is determined by way of a HZMO decision, as follows:

• Old age or early old-age pension

• Disability pension

• Survivor's pension

Once you have learned about your pension type, you will opt for a payment scheme depending on the people in your life.

No spouse or life partner at the moment of retirement:

• Single, childless, no beneficiaries desired

In this case, opt for a Single Lifelong Pension you will receive for life. This option does not allow you to designate a beneficiary who would, in the event of your early departure, receive a percentage of your pension benefits during a certain period.

• If you wish to designate beneficiaries

If you wish to designate beneficiaries who will, in the event of your early departure, receive your pension benefits during a certain period, opt for a Single Life Pension with a guarantee period (MO-S2). You will receive applicable pension benefits for life, and in the event of your early departure within the guarantee period, your designated beneficiaries will receive your pension benefits until the end of that period. You set the percentage of the pension benefits the designated beneficiaries will receive.

If you have a spouse or life partner, the payment scheme will depend on your partner's age and employment status.

At the moment of retirement, your spouse or life partner is older than 50:

• If your spouse or life partner is unemployed

Opt for a Joint Pension. In the event of your early departure, your spouse or life partner will continue to receive your pension benefits for life, in a percentage of your choice. If you wish to designate beneficiaries that will continue to receive your pension benefits upon your and your partner's early departure, opt for a Joint Pension with a guarantee period (MO-S4). You set the percentage of the pension benefits the designated beneficiaries will receive.

• If your spouse or life partner is employed

In this case, following your spouse or life partner's approval, you can opt for a Single Life Pension (MO-S1). If you wish to designate beneficiaries, opt for a Single Life Pension with a guarantee period (MO-S2). You can opt for a Joint Life Pension (MO-S3) without your partner's approval, and if you also wish to designate beneficiaries, opt for a Joint Life Pension with a guarantee period (MO-S4). You set the percentage of the pension benefits the designated beneficiaries will receive.

At the moment of retirement, your spouse or life partner is younger than 50:

• If your spouse or life partner is unemployed

In this case, opt for a Single Lifelong Pension with a guarantee period (MO-S2), and designate your spouse or life partner as your pension beneficiary following your early retirement within the guarantee period.

• If your spouse or life partner is employed

In this case, following your spouse or life partner's approval, you can opt for a Single Life Pension (MO-S1) and Single Life Pension with a guarantee period (MO-S2).

After submitting an application for pension benefits to the Croatian Pension Insurance Institute (HZMO), you will receive from REGOS provisional calculations made by HZMO and pension insurance companies (MOD). If you opt for a combined pension (Pillar 1 and 2) and want your pension benefits to be paid from Pillar 2 by HRMOD, you will need to do the following:

• Go to REGOS at a Financial Agency (FINA) branch office to sign a statement about the pension type of your choice – pension from both Pillar 1 and 2

• When you receive a HZMO decision on your basic pension (from Pillars 1 and 2), visit REGOS again and submit the R-POD form, detailing your decision to opt for HRMOD

• You can decide to opt for another pension insurance company within 15 days from the first submission. Once the deadline has expired, no further changes can be applied in this respect.

After submitting an application for pension benefits to the Croatian Pension Insurance Institute (HZMO), you will receive from REGOS a provisional calculation of a combined pension benefit (Pillars 1 and 2) and that from Pillar 1 only (as if you were insured through Pillar 1 only), helping you choose a more favourable option.

Use our web calculator for a provisional calculation of your pension benefits from Pillar 2.

Pillar 1 is based on generational solidarity and:

• Pension benefits are paid by the Croatian Pension Insurance Institute (HZMO) on the basis of a relevant decision

• Pension benefits are paid for the past month

• In the event of your sudden death, your successors are entitled to a pension in accordance with the Pension Insurance Act

Pillar 2 is based on single capitalised savings and:

• Pension benefits are paid by pension insurance companies (MOD) on the basis of a relevant contract

• Pension benefits are paid monthly in advance

• By opting for a guarantee period, you can ensure that your loved ones receive pension payments during a certain period

If you opt for a Pillar 1 pension only, all of your Pillar 2 savings will be transferred from your mandatory pension fund account into the state budget.

Pension benefits from Pillar 1 are paid by the Croatian Pension Insurance Institute.

You are entitled to a lump sum payment for old or early age pension only, depending on your pension savings in Pillar 1.

You can opt for a partial lump sum payout amounting to 15% of the overall amount of your Pillar 2 savings when entering into a contract with HRMOD, on condition that the basic old or early age pension from Pillar 1 is 15% higher than the lowest basic pension from Pillar 1.

Information about the fulfilment of the above requirement is listed together with a provisional pension calculation you will receive from REGOS.

You can enter into a contract on voluntary pension fund benefits with HRMOD based on your voluntary pension fund savings, and receive a partial lump sum of up to 30%. You can also set up a pension based on a direct lump sum payment made to HRMOD.

HRMOD pays the following voluntary pension benefits:

• Lifelong pension You become entitled to a life pension at the age of 60 at the earliest. As an exception, you can claim a life pension at the age of 50 if you became a member of a voluntary pension fund before 1 January 2019.

• Single lifelong pension (MD5)

• This option allows you to receive pension benefits for life

• Your pension benefit depends on the savings amount and your age

Single lifelong pension with a guarantee period (MD-1)

• This option allows you to receive pension benefits for life. In the event of your early departure, your designated beneficiary will continue to receive 50% or 100% of your pension benefit during the guarantee period of your choice

• The guarantee period may last from 5 to 30 years

• If a designated beneficiary suddenly dies during the guaranteed payment period, the total amount they are entitled to will be included in their inheritance

• The amount of pension depends on the amount of your savings, on your age, on the length of the guarantee period and finally on the percentage of your pension to be paid to your designated beneficiary.

Joint Lifelong Pension (MD-2)

• This option allows you to receive pension benefits for life

• You are eligible for this option if your life partner or spouse is 50 years old or older.

• In the event of your sudden death, your spouse or life partner will continue to receive monthly pension benefits

• Your pension benefit depends on the savings amount, the lump sum payment percentage and the age of both you and your partner

Joint Lifelong Pension with a guarantee period (MD6)

• This option allows you to receive pension benefits for life

• You are eligible for this option if your life partner or spouse is 50 years old or older.

• In the event of your sudden death, your life partner or spouse continues to receive a set percentage (50% or 100%) of your pension for the rest of their life.

• This pension type also allows you to designate a beneficiary who will, in the event of your death and the death of your partner, receive a contracted percentage of your pension (50% or 100%) for the duration of a defined (guarantee) period as per contract (from 5 to 30 years).

• The amount of pension depends on the amount of your savings, on your age and the age of your partner, on the length of the guarantee period and finally on the percentage of your pension to be paid to your life partner or spouse and the designated beneficiary.

• Provisional pension: You become entitled to an early lifelong pension at the age of 55 at the earliest. As an exception, you can claim a life pension at the age of 50 if you became a member of a voluntary pension fund before 1 January 2019.

Provisional standard pension (MD-3)

• You can set up a 5 to 30-year payment period

• In the event of your sudden death, your designated beneficiary or a legal successor will continue to receive pension benefits until the end of the payment period

• If a designated beneficiary departs early during the payment period, the total amount they are entitled to will be included in their inheritance

• Your pension benefit depends on the savings amount, the lump sum payment percentage, and the agreed upon payment period

Provisional single accelerated pension (MD-4)

• The pension payment period is set up to 5 years

• During the first three years, 30% of the total amount is paid, and in the fourth and fifth year 5% of the total pension benefit is paid in monthly instalments

• In the event of your sudden death, your designated beneficiary or a legal successor will continue to receive pension benefits until the end of the payment period

• If a designated beneficiary departs early during the payment period, the total amount they are entitled to will be included in their inheritance

• Your pension benefit depends on the savings amount, and the lump sum payment percentage

Use our web calculator for a provisional pension calculation. For more information about our pension schemes, visit LINK , contact us on 01-2231-430 or at info@hrmod.hr.

If, after becoming entitled to a voluntary pension, you wish to set up a payment of your savings amount from Pillar 3 via HRMOD, you will need to do the following:

• Submit a request to the relevant pension fund (MD) to transfer your savings amount to HRMOD

• Fill out a request for entry into a pension contract with HRMOD. This will take place once your pension fund account has been closed and the funds transferred to HRMOD

• Sign a contract on the payment of voluntary pension

If you have not yet done so, you can realise any and all payment orders received from your voluntary pension fund in the form of a partial lump sum payout.

It is not possible to set up a partial lump sum payout for direct lump sum payments.

A claim for a pension from Pillar 3 can be submitted for:

• a lifelong pension at the age of 60

• a temporary pension at the age of 55.

As an exception, you can claim a lifelong pension at the age of 50 if you became a member of a voluntary pension fund before 1 January 2019.

We will make regular monthly payments into your account on the basis of your pension contract with HRMOD.

HRMOD keeps the pension funds in a separate account that is not used for the Company's expenses and does not make part of its bankruptcy estate.

We keep our business operations secure and reliable through key functions of our strict internal control system, mandatory annual financial statement audits by an independent external auditor and regular (in)direct monitoring performed by the Croatian Financial Services Supervisory Agency.

We invest your pension funds into different financial assets, depending on the type of pension you opted for.

• In line with our conservative investment policy, funds for the payment of MANDATORY pensions are invested on a long-time basis, primarily in government bonds whose share in assets may not be lower than 70%, and to a smaller extent in other forms of financial assets, in line with legally prescribed investment limits.

• Funds for the payment of VOLUNTARY pensions are primarily invested in bonds, investment funds and stocks as well as in other forms of financial assets in line with legally prescribed investment limits.

You can find additional information about how we invest your funds on our website, in the Statement on Investment Principles.

Mandatory pension

The agreed upon mandatory pension benefit and a partial lump sum payout are taxed as dependent work income. HRMOD is obliged to calculate the corresponding tax and surtax and pay you the agreed upon amount less tax and surtax. Tax rates for pensioners are reduced to 10% and 15%, depending on the tax bracket. The surtax rate depends on the place of residence and is calculated on the basis of the tax amount.

Voluntary pension

The agreed upon mandatory pension benefit and a partial lump sum payout are taxed as insurance income (currently not taxed).

A pension benefit calculation depends on the following parameters selected on the basis of the pension type and arrangement:

• Payment order/lump sum amount

• Guarantee period for life pensions, or payment period for temporary pensions

• Pension percentage paid to designated beneficiaries

• Pension percentage paid to a spouse or life partner

• Various elements of actuarial calculation: mortality tables – age of the beneficiary, or of their spouse or life partner in the case of a joint pension; accrued interest rate; expected rate of pension adjustments

All applicable HRMOD fees have been included into your monthly pension benefit and no additional amount reductions apply in this respect.

HRMOD fees:

• A one-off contract entry fee

• An annual contract maintenance fee

The fee amount depends on the agreed upon pension type and arrangement.

The fee amount depends on the agreed upon pension type and arrangement.

In addition to one-off contract entry fee, the Company may exercise the right to a fee for technical reserves asset management.

Namely, the Company forms technical reserves on the basis of remittances received, which it invests in accordance with the Law and by-laws, and is obliged to ensure that the value of assets to cover technical reserves is at all times greater than 100% of the value of all current and future obligations under pension contracts. If so, the Company has the right to charge technical reserves asset management.

Such fee may amount to a maximum of 0.6% of the annual total assets minus the financial liabilities of the assets to cover technical reserves in 2020 and 2021, and for each subsequent year the maximum compensation rate is reduced by 10% in relation to the compensation rate that has been applied in the previous year, rounded to three decimal places, as long as this reduction results with maximum fee rate of 0.3%, and the basis for the calculation of this fee is determined by the Croatian Financial Services Supervisory Agency in the Ordinance on the basis for the calculation and method of charging the asset management fee .

The above compensation does not affect the amount of the contracted pension

HRMOD adjusts the pension in accordance with the provisions of the Act on Pension Insurance Companies according to the rate of change of the consumer price index at least twice a year for the previous half-year. The consumer price index is determined according to data from the National Bureau of Statistics. Every year, the change in the consumer price index is compared for the period:

January 1st - June 30th of the current year compared to the period July 1st - December 31st the previous year

July 1st - December 31st of the current year compared to the period January 1st – June 30th current year

and HRMOD, after receiving the rate of change in the consumer price index from the National Bureau of Statistics, begins the adjustment as described below. HRMOD receives the rate of change of the consumer price index in the month following the end of the half-year (during January and July of the current year).

The pension beneficiary has the right to the pension adjustment if the pension contract was active (in force) in the previous half-year (e.g. for the adjustment carried out for the first half of the current year, these are all contracts with the payment start date according to the contract until June 30th of the current year, provided that the contract has not ceased to be in force (has not expired) by that same date, in such a way that:

after the end of the first half of the current year, the amount of pension paid for July is adjusted and the new amount of pension is paid with the start of pension payment on August 1st of the current year, with payment of arrears for July, and

after the end of the second half of the previous year, the amount of pension paid for January is adjusted and a new amount of pension is paid with the start of pension payment on February 1st of the current year, with payment of arrears for January.

Example 1: if your pension contract stipulates the beginning of pension payment from II. pillar enters into force on March 1st, 2022, the first adjustment will be made at the end of the first half of 2022 in such a way that the pension you received for July will be adjusted and the new amount of the pension will be paid with the start of the pension payment from August 1st, 2022, with payment of arrears for July. After this first adjustment, the following pension adjustments follow: February 1st next year and August 1st next year.

Example 2: if your pension contract stipulates the start of pension payment from II. pillar into force on October 1st 2022, the first adjustment will be made at the end of the second half of 2022 in such a way that the pension you received for January will be adjusted and the new pension amount will be paid with the start of pension payments from February 1st 2023, with payment of arrears for January. After this first adjustment, the following adjustment of the pension will follow on August 1st current year and on February 1st next year.

In the case of a negative consumer price index, the pension will remain unchanged until a positive cumulative change in the consumer price index is achieved, when the Company will first apply the correction of the adjustment rate for all previously realized negative periods, and perform adjustment for the remaining positive balance. The rate correction formula is: (1+i1)*(1+ i2)*…*(1+ in)-1, where all ik (indices in the k period), k=1,…,n, are semi-annually calculated indices starting from the first one that was negative.

An example of the adjustment of the pension with a positive and negative rate of change of the consumer price index:

		Example of the adjustment
Adjustment period*	Change in the consumer price index in the period*	Pension amount according to index	Pensions that would be paid in the period according to index	Cumulative index	Pension	Actually paid pensions in the period
		1.000,00	6.000,00		1.000,00	6.000,00
1	5,00%	1.050,00	6.300,00	5,00%	1.050,00	6.300,00
2	-5,00%	997,50	5.985,00	-5,00%	1.050,00	6.300,00
3	2,00%	1.017,45	6.104,70	-3,10%	1.050,00	6.300,00
4	8,00%	1.098,85	6.593,08	4,65%	1.098,85	6.593,08
5	5,00%	1.153,79	6.922,73	5,00%	1.153,79	6.922,73
Pension paid in total			31.905,51			32.415,81

* each period consists of a 6-month period in this example

All Pillar 1 beneficiaries may claim a pension supplement, irrespective of whether they receive a combined pension from Pillars 1 and 2 or that from Pillar 1 only. A pension supplement is paid from the state budget and makes an integral part of a pension from Pillar 1.

Beneficiaries receiving pensions based on special regulations providing for more favourable terms and conditions than those prescribed by the Pension Insurance Act as well as beneficiaries receiving the highest and the lowest pension benefits are not entitled to a pension supplement.

If you opt for a Pillar 1 pension only, you are entitled to a 27% supplement based on your total pension benefit.

If you opt for a pension from Pillars 1 and 2, you are entitled to a 27% supplement for the amount paid from Pillar 1, i.e. for the number of years of pensionable service until 31 December 2001, or a 20.25% supplement for the period of pensionable service from 1 January 2002 until the day you become entitled to a pension.

The Croatian Pension Insurance Institute pays basic pension with a supplement.

No, there is no supplement for Pillar 2 pensions.

A pension supplement is calculated as a percentage of a Pillar 1 pension and paid by the Croatian Pension Insurance Institute.

In that case, your employer continues to pay contributions to Pillar 2. If you are already a pension beneficiary in HRMOD, the Company revises the calculation of your pension in accordance with the payments received on each anniversary of the conclusion of the Pension Agreement.

From January 1, 2023, the euro will be introduced as the official currency in the Republic of Croatia. From the day of the introduction of the euro, the pension which was previously in kuna, is converted into euros using a fixed conversion rate of 1 EUR = 7.53450 HRK in accordance with the legal regulations.

The introduction of the euro does not affect the contractual rights and obligations, it will not cause additional costs, and it is not necessary to conclude an addendum to the Pension Agreement.

You can continue to receive your pension payment to your existing account, as kuna accounts become euro accounts from January 1, 2023.