One may receive Pillar 2 pension benefits once they become entitled to Pillar 1 pension benefits (paid by the Croatian Pension Insurance Institute (HZMO)). One's pension type is to be laid down in the HZMO Decision, and it may be:

• Old age or early old-age pension

• Disability pension

• Survivor's pension

Once you are assigned a pension type, you can choose one of the following HRMOD pension benefits payment forms:

NO GUARANTEE PERIOD

Classic

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

Partner

• Pension you can choose if you have a spouse/non-marital partner, life partner, or informal life partner (hereinafter referred to as the partner).

• Such pension benefits will be paid to you and your surviving partner for life.

• The status of non-marital partnerships and informal life partnerships shall be established in non-contentious judicial proceedings.

WITH GUARANTEE PERIOD

Classic 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

• Pension you can choose if you have a partner. In addition to the fact that pension benefits are paid to you and, after your death, to your partner for life, by choosing this pension form, you can also designate beneficiaries/successors to whom pension benefits can be paid in monthly annuities until the end of the guarantee period you choose. That way, the payment of pension benefits is guaranteed for a period of at least 5 to as many as 30 years.

ONE TIME REFUND

Direkt

• You will be paid pension benefits for life. Should any amounts remain after your death, a lump-sum payment of such amounts will be made to your successors.

Direkt plus

• Pension you can choose if you have a partner. Such pension benefits will be paid to you and your surviving partner for life. Should any amounts remain after your and your partner’s death, a lump-sum payment of such amounts will be made to your successors.

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).

Once you submit an Application for Pension to the Croatian Pension Insurance Institute (HZMO), REGOS will provide you with informative calculations by the HZMO and pension insurance companies. If you choose a combined pension (Pillar 1 and 2) and wish to be paid Pillar 2 pension benefits by the HRMOD, please do the following:

• Sign the Statement on the type of pension you have opted for at a FINA office (REGOS counter) or the Pension Information Center in Zagreb, Rijeka, Pula, or Split.

• Once you receive HZMO’s Decision recognizing your right to basic pension (Pillar 1 and 2 pension), you shall sign the R-POD Form at FINA or the Pension Information Center, confirming you chose the HRMOD.

• Your pension insurance company choice can be changed within 15 days from the day you first registered with REGOS. Once said period expires, you cannot change or revoke your choice of a pension insurance company.

Once you submit an Application for Pension to the Croatian Pension Insurance Institute (HZMO), REGOS will provide you with an informative pension calculation displaying the combined pension amount (Pillar 1 and 2) and Pillar 1 pension only (as if you were only insured under Pillar 1). Based on said calculation, you will be able to make the decision that is most favorable for you.

The informative calculation of your Pillar 2 pension can be checked right away using our web calculator.

Pillar 1 is based on generational solidarity and:

• pension benefits are paid by the Croatian Pension Insurance Institute (HZMO) based on a Decision

• pension benefits are paid in advance on a monthly basis

• in the event of the beneficiary’s death, their successors become entitled to their pension benefits in accordance with the Pension Insurance Act.

Pillar 2 is based on individual capitalized savings. Thus

• pension benefits are paid by pension insurance companies based on a contract

• pension benefits are paid in advance on a monthly basis

• by stipulating a guarantee period, you can ensure the payment of pension benefits to your loved ones for a defined period of time.

If you opt for Pillar 1 pension only, all your Pillar 2 savings will be transferred from your personal account in the compulsory pension fund to the state budget.

Payments of Pillar 1 pension benefits are made by the Croatian Pension Insurance Institute.

You are entitled to a partial lump-sum payment only for old-age pension or anticipated old-age pension, and it will depend on the amount of your Pillar 1 pension benefits.

A partial lump-sum payment of up to 20% of the total amount of your Pillar 2 savings can be stipulated at the time you enter into a contract with the HRMOD, namely provided that your basic or anticipated old-age Pillar 1 pension is higher than the lowest basic Pillar 1 pension.

Information on the fulfillment of this condition can be found in the informative pension calculation you will receive from REGOS.

If members of the compulsory pension fund (including family members entitled to survivors’ pension) do not enter into a pension contract with the HRMOD within 12 months from the day the funds are transferred into HRMOD’s account, HRMOD will, within 30 days from the day of expiry of said period, transfer the aforementioned funds to the state budget of the Republic of Croatia, and it shall be entitled to reduce them by the amount of the expenses it actually incurred in relation to the holding of said funds.

After the expiry of the 12-month period from the day the funds are transferred into HRMOD’s account, it will be presumed that the compulsory pension fund member has refrained from entering into a pension contract (i.e. exercising their right to pension benefits through the HRMOD), as well as that they consent to the HRMOD proceeding as described above.

Once the funds are transferred to the state budget of the Republic of Croatia, the pension shall be set by the Croatian Pension Insurance Institute in accordance with the act governing pay-as-you-go pension insurance, and the date one becomes entitled to pension benefits shall be the same as if the pension beneficiary were insured only under compulsory pension insurance organized on a pay-as-you-go basis. The HRMOD will inform the Ministry of Finance and the Croatian Pension Insurance Institute of such a transfer of funds to the state budget of the Republic of Croatia within eight days from the date of transfer. Before transferring said funds to the state budget, the HRMOD shall send a warning to compulsory pension fund members (including family members entitled to survivors’ pension), namely by registered mail and within three months from the date of receipt of the funds in its account and, again, five months before the expiry of the aforementioned 12-month period, in order to remind them of their obligation to enter into a pension contract and of the aforementioned consequences of a failure to enter into such a contract, including HRMOD’s right, while holding said funds, to cover any expenses it actually incurs in relation to the funds.

Similarly, the HRMOD will transfer all subsequent compulsory pension insurance contributions paid into its account on behalf of compulsory pension fund members (including family members entitled to survivors’ pension) to the state budget of the Republic of Croatia on a quarterly basis, and it shall be entitled to reduce them by the amount of the expenses it actually incurred in relation to the holding of said funds. In such cases, the HRMOD is not required to remind compulsory pension fund members (including family members entitled to survivors’ pension) of their obligation to enter into a pension contract and of the aforementioned consequences of a failure to enter into such a contract.

You can enter into a voluntary insurance pension contract with the HRMOD based on your voluntary pension fund savings, namely with the possibility of a partial lump-sum payment of up to 30% of your savings. Pension can also be contracted based on a direct lump-sum payment into HRMOD’s account.

The HRMOD pays the following types of voluntary pension benefits:

• Lifelong pension The right to lifelong pension cannot be exercised before the age of 60; exceptionally, it may be exercised at the age of 50 if one became a voluntary pension fund member before 01/01/2019.

• Individual lifelong pension (MD5)

• This type of pension allows you to receive pension benefits for life.

• The monthly pension benefits amount depends on the amount of your savings, the percentage of the lump-sum payment, and your age

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

• This type of pension allows you to receive pension benefits for life. In the event of the pension beneficiary’s death, the designated beneficiary will continue to receive 50% or 100% of the beneficiary’s pension in the guarantee period chosen by the pension beneficiary.

• The duration of the guarantee period ranges from 5 to 30 years.

• In the event of death of the designed beneficiary during the guaranteed payment period, all money due to them will be included in their estate.

• The pension benefits amount depends on the savings, the percentage of the lump-sum payment, the age of the pension beneficiary, the duration of the guarantee period, and the pension percentage that the designed beneficiary would have received.

Joint Lifelong Pension (MD-2)

• This type of pension allows you to receive pension benefits for life.

• It can only be contracted if the pension beneficiary’s partner has reached the age of 50.

• In the event of the pension beneficiary’s death, monthly pension benefits continue to be paid to their partner.

• The pension benefits amount depends on the savings, the percentage of the lump-sum payment, and the age of the pension beneficiary and their partner.

Joint Lifelong Pension with a guarantee period (MD6)

• This type of pension allows you to receive pension benefits for life.

• It can only be contracted if the pension beneficiary’s partner has reached the age of 50.

• In the event of the pension beneficiary’s death, the partner continues to receive a percentage of their pension benefits (50% or 100%) for life.

• This form of pension benefits payment also entails the designation of a beneficiary who, in the event of death of the pension beneficiary and their partner, will continue to receive the stipulated pension percentage (50% or 100%) during the defined (guarantee) period laid down in the Contract (from 5 to 30 years).

• The pension benefits amount depends on the savings, the percentage of the lump-sum payment, the age of the pension beneficiary and their partner, the duration of the guarantee period, and the pension percentage that the partner (as well as the designed beneficiary) would have received.

• Temporary pension: This right cannot be exercised before the age of 55; exceptionally, it may be exercised at the age of 50 if one became a voluntary pension fund member before 01/01/2019.

Provisional standard pension (MD-3)

• A payment period of 5 to 30 years can be stipulated.

• In the event of the pension beneficiary’s death, pension benefits continue to be paid to their designated beneficiary or legal successor until the end of the payment period.

• In the event of death of the designed beneficiary during the payment period, all money due to them will be included in their estate.

• The pension benefits amount depends on the amount of your savings, the percentage of the lump-sum payment, and the stipulated payment period.

Temporary individual accelerated pension (MD-4)

• A 5-year pension benefits payment is stipulated

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

• In the event of the pension beneficiary’s death, pension benefits continue to be paid to their designated beneficiary or legal successor until the end of the payment period.

• In the event of death of the designed beneficiary during the payment period, all money due to them will be included in their estate.

• The pension benefits amount depends on the savings and the percentage of the lump-sum payment.

For an informative calculation of your pension benefits, visit our web calculator, and for more information on pension schemes, visit this LINK or contact us at 01/2231-430 or via email at info@hrmod.hr.

If, once you become entitled to voluntary pension benefits, you wish to arrange the payment of your Pillar 3 savings through the HRMOD, you shall:

• submit a request to the pension fund for the transfer of your savings to the HRMOD

• fill in the request for entering into a pension contract with the HRMOD, which shall be entered into once your personal account in the pension fund is closed and your funds are transferred into HRMOD’s account

• sign the Voluntary Pension Contract

For all transfers received from the voluntary pension fund, you are entitled to a partial lump-sum payment if you have not already used it in the fund.

For direct lump-sum payments, it is not possible to arrange a partial lump-sum payment.

The right to Pillar 3 pension cannot be exercised before:

• the age of 60 for lifelong pension

• the age of 55 for temporary pension.

Exceptionally, you can become entitled to lifelong and temporary pension at the age of 50 if you entered into a contract with a voluntary pension fund before 01/01/2019.

The HRMOD guarantees that it will regularly pay the pension benefits into your account (namely every month) pursuant to the contract you entered into with the HRMOD.

HRMOD keeps the funds for the payment of your pension benefits separate from its own funds, namely in a special bankruptcy remote account that may not be used to cover its own expenses.

Business security is ensured by a strict and professional internal system of controls through established key functions, by the obligation to have financial statements audited by an independent external auditor on an annual basis, and by regular indirect and direct supervision by the Croatian Financial Services Supervision Agency.

Given our conservative investment policy, we invest funds for the payment of COMPULSORY pension benefits for long periods of time, primarily in government bonds whose share in the assets must not amount to less than 50% and, to a lesser extent, in other forms of financial assets in line with legal investment limits.

• We invest funds for the payment of VOLUNTARY pension benefits mainly in treasury bills and bonds, as well as in other types of financial assets in line with legal investment limits.

Answers to any additional questions related to the investment of your funds can be found in the Statement of Investment Principles available on our website.

Compulsory pension

The stipulated compulsory pension and partial lump-sum payments are treated as income from employment for tax purposes. Thus, when paying the stipulated pension amount, the HRMOD shall calculate the related income tax and pay you the stipulated amount net of said tax. On 01/01/2024, tax rates will be set by decisions of the representative bodies of cities and municipalities (self-government units).

An overview of tax rates of cities/municipalities can be found at this link poveznici https://www.porezna-uprava.hr/HR_porezni_sustav/Stranice/Popisi/Stope.aspx#InplviewHash59668847-fd10-40e5-9d42-36dc356e960d=

Income tax rates for pensioners are to be reduced (and are 50% lower than regular income tax rates), depending on tax brackets.

A lower tax rate is applied to amounts up to EUR 4,200 paid in a given month, with a higher tax rate being applied to the part exceeding EUR 4,200.

The Tax Administration calculates the annual tax and establishes the tax difference to be paid or refunded in a tax ruling.

Voluntary pension

The stipulated voluntary pension and partial lump-sum payments are treated as insurance income for tax purposes, and they are currently not taxed.

The pension benefits calculation is based on the selected parameters in line with the pension type and form, namely:

• the savings or lump-sum payment amount

• the duration of the guarantee period in the case of lifelong pensions, or the duration of payment in the case of temporary pensions

• the percentage of the pension paid to designated beneficiaries

• the percentage of the pension paid to the spouse or life partner

• different actuarial calculation elements: mortality tables – age of the beneficiary, age of the partner in case of joint pension; applied interest rate

All fees are already included in the monthly pension benefits, and they include all of HRMOD’s expenses and do not further reduce the amount of the pension benefits.

Fees for HRMOD’s expenses:

• one-off fee for the costs of concluding the contract

• Annual fee for the costs of maintaining the pension contract

The fee depends on the type and form of the stipulated pension.

The fee depends on the type and form of the stipulated pension.

In addition to the one-off and annual fee, the Company may be entitled to an asset management fee to cover technical reserves.

The Company creates technical reserves based on received transfers, which it invests in accordance with the laws and by-laws, and it is required to ensure that the value of the assets used to cover technical reserves is at all times higher than the full value of all current and future obligations under pension contracts. If that is the case, the Company is entitled to charge an asset management fee to cover technical reserves. The fee can amount to no more than 0.6% of the total annual assets (minus the financial liabilities for the assets used to cover technical reserves in 2019, 2020, and 2021). For each subsequent year, the maximum fee rate is to be reduced by 10% in relation to the fee rate applied in the previous year (rounded to three decimal places) until the maximum fee rate reaches 0.3% as a result of said reduction.

The company is entitled to an asset management fee to cover intervention reserves amounting to no more than 0.437% of the total annual assets (minus the financial liabilities for the assets used to cover intervention reserves in 2024). For each subsequent year, the maximum fee rate is to be reduced by 10% in relation to the fee rate applied in the previous year, rounded to three decimal places, until the maximum fee rate reaches 0.3% as a result of said reduction. Ordinance on the basis for the calculation and method of charging the asset management fee .

Said fee does not affect the amount of the stipulated pension and is not contained in the pension contract.

The basic personal deduction amounts to EUR 560.00 per month. The personal deduction can be increased depending on one's life circumstances, namely:

You can use your personal deduction provided that you have not used it up in its entirety with other pension or salary paying agents. You can request that your personal deduction be divided between different paying agents (with the percentages that suit you) at your tax administration office or through the e-Citizens platform.

The HRMOD adjusts the pension benefits in accordance with the provisions of the Act on Pension Insurance Companies and in line with the rate of change in the consumer price index, namely at least twice a year for the preceding six-month period. The consumer price index is defined based on the data provided by the National Bureau of Statistics. The change in the consumer price index is compared between the following periods every year:

the 01/01 – 30/06 period of the current year relative to the 01/07 – 31/12 period of the previous year

the 01/07 – 31/12 period of the current year relative to the 01/01 – 30/06 period of the current year.

After receiving the rate of change in the consumer price index from the National Bureau of Statistics, the HRMOD proceeds with the adjustment as described below. The HRMOD receives the rate of change in the consumer price index in the month following the end of a given six-month period (in January and July of the current year).

The pension beneficiary is entitled to have the amount of their pension benefits adjusted if their pension contract was active (in force) in the previous six-month period (e.g. for the adjustment carried out for the first six-month period of the current year, the above shall apply to all contracts with the contractual payment start date before June 30 of the current year, provided that the contracts have not ceased to have effect (have not expired) prior to said date), namely as follows:

Following the end of the first six-month period of the current year, the amount of pension benefits paid for July will be adjusted, and the new pension benefits amount will be applicable starting from August 1 of the current year (with the payment of arrears for July).

Following the end of the second six-month period of the previous year, the amount of pension benefits paid for January will be adjusted, and the new pension benefits amount will be applicable starting from February 1 of the current year (with the 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 that the payment of Pillar 2 pension benefits is to begin on October 1, 2022, the first adjustment will be made following the end of the second six-month period of 2022, with the pension benefits you received for January being adjusted, and the new pension benefits amount being applicable from February 1, 2023 (with the payment of arrears for January). Following this first adjustment, subsequent pension adjustments will take place on August 1 of the current year and February 1 of the following year.

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

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

		An example of adjustment
Adjustment period*	Change in the consumer price index in the period in question*	Amount of pension benefits based on the index	Pension benefits that would have been paid in the period in question based on the index	Cumulative index	Pension	Actual pension benefits paid in the period in question
		132,72	796,34		132,72	796,34
1	5,00%	139,36	836,15	5,00%	139,36	836,15
2	-5,00%	132,39	794,35	-5,00%	139,36	836,15
3	2,00%	135,04	810,23	-3,10%	139,36	836,15
4	8,00%	145,84	875,05	4,65%	145,84	875,05
5	5,00%	153,13	918,80	5,00%	153,13	918,80
Total pensions paid			4.234,58			4.302,32

* In this example, each period comprises 6 months.

The pension supplement can be obtained by all Pillar 1 pension beneficiaries, regardless of whether they receive combined Pillar 1 and 2 pension benefits or Pillar 1 pension benefits only. The pension supplement is paid from the state budget and constitutes an integral part of Pillar 1 pension benefits.

Beneficiaries of pensions obtained and/or determined based on special regulations under more favorable conditions than those set out in the Pension Insurance Act and beneficiaries of the highest and lowest pension benefits are not entitled to a pension supplement.

The Pillar 1 pension supplement amounts to 27%, regardless of whether you have chosen Pillar 1 pension only or a combined Pillar 1 and 2 pension.

Payments of basic pension benefits with the supplement are made by the Croatian Pension Insurance Institute.

There is no supplement to Pillar 2 pension benefits.

The pension supplement is applicable to the Pillar 1 part of the pension, and it will be paid by the Croatian Pension Insurance Institute.

In this case, your employer continues to pay contributions to Pillar 2. If you are already an HRMOD pension beneficiary, the Company will, on each anniversary of your pension contract, revise the calculation of your pension benefits based on the payments received and begin with the payment of the new pension benefits amount on the date of the first subsequent pension payment. At your request, the HRMOD can also revise the pension benefits calculation before the anniversary of your pension contract. When revising the pension benefits amount, the applicable fee will be charged.

With the first pension payment, the Company will pay you the first monthly pension, arrears, and a lump-sum payment, if stipulated. In that case, the basis for distributing the funds into a regular and protected account (if opened and submitted to the Company) is the sum of all said receipts after taxes and surcharges (net amount). If your receipts are higher than the average net salary in the Republic of Croatia, 2/3 of the average net salary in the Republic of Croatia will be exempt from enforcement. If your receipts are lower than the average net salary in the Republic of Croatia, 3/4 of your receipts will be exempt from enforcement.

Example of enforcement for the year 2023 with respect to the receipts you are to receive with the first monthly pension payment:

Example 1: Your first monthly pension amounts to EUR 100, the arrears amount to EUR 300, and the lump-sum payment amounts to EUR 1000. The total receipts in the month of payment amount to 1400 EUR. The rules described above are to be applied to said total amount, meaning that your receipts are higher than the average net salary (which amounts to EUR 1,006.44 for 2023). If enforcement is carried out to recover other claim types (i.e. not, for instance, for statutory maintenance purposes), you will be paid 2/3 of the net salary, namely EUR 670.96, into your protected account, and the remaining amount of all receipts will be enforced.

Example 2: After the first payment of pension benefits, arrears, and the lump-sum payment (if stipulated), the Company will continue to pay you monthly pension benefits, with the above rules being applied. For instance, if your monthly pension benefits still amount to EUR 100, they are lower than the average net salary (which amounts to EUR 1,006.44 for 2023). If enforcement is carried out to recover other claim types (i.e. not, for instance, for statutory maintenance purposes), 3/4 of your pension benefits will be exempt from enforcement (EUR 75) and paid into a protected account, and the remaining amount will be enforced.