Guidelines for Preparing Informative Pension Calculations from Mandatory Pension Insurance of Individual Capitalized Savings

Based on Article 112, Paragraph 17 of the Act on Pension Insurance Companies (Official Gazette Nos. 22/2014, 29/2018, 115/2018, and 156/2023), the Management Board of the Croatian Financial Services Supervisory Agency (Hanfa) adopted the following at its meeting held on June 28, 2024:

GUIDELINES FOR THE PREPARATION OF INFORMATIVE PENSION CALCULATIONS FROM MANDATORY PENSION INSURANCE OF INDIVIDUAL CAPITALIZED SAVINGS

I. INTENT AND PURPOSE OF THE GUIDELINES

With the intent to describe the principles that a pension insurance company (hereinafter: Company) should adhere to when, upon the request of a member of the mandatory pension fund (hereinafter: Fund Member), preparing informative pension calculations from mandatory pension insurance of individual capitalized savings (hereinafter: Informative Pension Calculation) pursuant to Article 112, Paragraph 11 of the Act on Pension Insurance Companies (Official Gazette Nos. 22/14, 29/18, 115/18, and 156/23, hereinafter: the Act), the Croatian Financial Services Supervisory Agency (hereinafter: Hanfa) issues these Guidelines.

The purpose of these Guidelines is to ensure uniform conduct by the Company, i.e., to establish uniform and established business practices in the preparation of informative pension calculations, all with the aim of improving the level of information provided to Fund Members for whom the moment has arrived that they have less than one year until entitlement to a pension is realized. The very meaning of the introduced legal novelties regarding individual information for Fund Members was to ensure that Fund Members, as potential pension beneficiaries, are informed in a timely and comprehensive manner about the further actions they will have to take or decisions they will have to make, all to facilitate the pension choice process.

In this regard, in addition to the introduced obligation for the pension company to provide the Fund Member, for whom the moment has arrived that they have less than one year until entitlement to a pension is realized, with a notice containing all information prescribed by the law governing the operation of mandatory pension funds, a possibility is also provided for the Fund Member, after receiving such notice, to request the Company to prepare an informative pension calculation for various applicable options of pension programs currently distributed by the Company.

In the context of the above, the Company is expected to briefly inform and explain to the Fund Member the purpose of the informative pension calculation that the Company is able to compile at the time of the Fund Member's request, and on the basis of which data, by referring to the Notice previously delivered to that Fund Member, in which they were informed about all actions they are obliged to take as well as the necessary documentation and data to be collected in order to realize the right to a pension.

Considering that the Company is obliged to prepare informative pension calculations upon the request of a Fund Member, but based on data which the Company does not possess, it was necessary to prescribe the manner in which Companies can obtain the aforementioned data.

Furthermore, given that Companies are obliged to prepare the informative pension calculation based on data they do not possess themselves, but rather on data they will receive from the Fund Member as well as the Central Registry of Insured, and that these are data and circumstances that are relevant for such calculation at that moment, which may change (in whole or in part) over time until the right to a pension is realized, it is necessary to make the Fund Member aware that these are informative pension calculations that are not final nor can they be entirely precise, and to explain in clear, simple, and easily understandable language the circumstances upon which the final pension amount depends, which will be agreed upon and paid to the Fund Member as a pension beneficiary based on a pension contract concluded with the Company.

II. CONTENT OF THE GUIDELINES

Article 112, Paragraph 11, points a) to d) of the Act prescribe the obligations that the Company must adhere to when preparing informative pension calculations for various options of pension programs currently distributed by the Company.

In the sense of the aforementioned obligations, the Company is obliged to:

a) warn the Fund Member that these are informative pension calculations that are not final because the final calculation depends on a series of factors (and list which ones) and that they cover only the pension from mandatory pension insurance of individual capitalized savings;

b) direct the Fund Member on which data they need to provide so that a correct informative pension calculation can be made;

c) clearly convey to the Fund Member the disclaimers regarding the precision of the informative pension calculations and the reasons for such disclaimers;

d) explain to the Fund Member the risks associated with specific pension programs and different pension payout options they offer, including all related fees.

Similarly, in order for the Company to be able to prepare an informative calculation, it needs, among other things, the personal data of the Fund Member as well as the data on the balance of that Fund Member's personal account. Since the Company does not possess the aforementioned data, Article 112, Paragraph 11 b) and Paragraph 12 of the Act prescribe the obligation of the Company, when a Fund Member requests the preparation of an informative pension calculation pursuant to Article 112, Paragraph 11 of the Act, to direct the Fund Member on which data they need to provide so that a correct informative pension calculation can be made, as well as to obtain a statement and consent from the member of the mandatory pension fund, that based on such statement and consent, the Company can request the Central Registry of Insured to provide the balance of that member's personal account, for the purpose of preparing the informative pension calculation.

With these Guidelines, addressed to the Company, Hanfa points out possible standards, desirable practices, and principles that would be advisable to apply during the execution of the aforementioned legal obligations.

1. Statement and Consent of the Fund Member for Obtaining Data from the Central Registry of Insured Regarding the Balance of the Member's Personal Account (Article 112, Paragraph 12 of the Act)

The Company is expected to prepare a unified form of the Fund Member's statement which will contain the consent of that member for the Company, based on such statement, without additional approvals from the Fund Member, to obtain from the Central Registry of Insured the data on the balance of their personal account in the mandatory pension fund on the date of delivery of the aforementioned data.

The aforementioned statement must clearly state that the Company is authorized to use the obtained data exclusively for the purpose of preparing informative pension calculations upon the request of the Fund Member, and that the collected data represent business secrets within the meaning of Article 68 of the Act. Furthermore, the Company is obliged to process the obtained data in accordance with the provisions of Article 68.c of the Act.

The Company is expected to publish the form of such statement on its website, with a brief explanation, which will contain the required consent of the Fund Member for obtaining the aforementioned data from the Central Registry of Insured, stating the purpose of using the obtained data.

2. Information on Data Required for Preparing the Informative Pension Calculation from Mandatory Pension Insurance of Individual Capitalized Savings

After the Fund Member, who has previously received the notice from the pension company pursuant to Article 112, Paragraph 14 of the Act, contacts the Company with a request for the preparation of an informative pension calculation, the Company is expected to obtain from the aforementioned member all data necessary for preparing informative pension calculations that will contain various options of pension programs currently distributed by the Company, which are applicable to them based on the data obtained from that Fund Member.

The Company is expected to explain in clear, simple, and easily understandable language to the Fund Member the reasons why each piece of data collected is needed, and to publish the set of data required for correct informative pension calculations with additional explanations on its website. In doing so, the Company is expected to explain the reasons why, in addition to data relating to the Fund Member, it is also necessary to collect data relating to the spouse/ex-spouse or life partner thereof, as well as minor children.

The Company is also expected to disclaim to Fund Members in a simple and clear manner by stating that the Company does not have the ability to verify the accuracy and truthfulness of the provided data, and to warn the Fund Member of the consequences of providing inaccurate or untrue data.

The Company is expected to use the collected data exclusively for the purpose of preparing informative pension calculations and to process them in accordance with the provisions of Article 68.c of the Act. Furthermore, the collected data represent business secrets within the meaning of Article 68 of the Act.

3. Explanation of Risks Associated with Specific Pension Programs and Different Pension Payout Options Distributed, Including All Related Fees

The Company is expected that the informative pension calculations, in accordance with Article 112, Paragraph 11 of the Act, contain various options of pension programs currently distributed by the Company that are applicable to that Fund Member.

The Company is expected that the informative pension calculations regarding the possibility of choosing a partial lump-sum payment from the total received payout, and regarding pension programs contracted with a guaranteed period, contain at least the following options:

• display of the informative pension amount without partial lump-sum payment and with a partial lump-sum payment of 20%;
• display of the informative pension amount with options for the duration of the guaranteed period in the minimum and maximum duration prescribed, as determined in the Company's Rules.

The Company is expected to describe and explain in simple and easily understandable language the risks associated with each specific pension program currently distributed by it, as well as the risks of different options of pension programs distributed that are applicable to that Fund Member, i.e., those included in the informative pension calculation. The Company is expected to describe in simple and easily understandable language the definitions of terms relevant for understanding certain payout options (e.g., guaranteed period, named beneficiary), including the possibilities associated with them (e.g., different durations of the guaranteed period and consequences of contracting/not contracting it), in relation to the options of pension programs included in the informative pension calculation.

The Company is expected that the explanations of pension programs and risks related to contracting them contain information on what happens to the amounts intended for pension payout if the pension beneficiary dies after the conclusion of the pension contract.

Similarly, the Company is expected to briefly describe in the informative pension calculation the parameters and/or elements that the Company will take into account when preparing the informative pension calculation, all to facilitate the understanding of any differences that may arise from choosing different forms of pension payout.

When describing the pension program that contains the Company's obligation to adjust the pension amount pursuant to Article 116 of the Act, it is necessary to briefly write the method of conducting the adjustment, as well as direct the Fund Member to the relevant legal provisions prescribing the aforementioned obligation, as well as the Company's additional obligations during the term of the pension contract (e.g., obligation to provide information on the change in pension amount, etc.).

When describing the pension program without adjustment of the pension amount pursuant to Article 116 of the Act, it is necessary to briefly and clearly describe in understandable language all relevant information needed by the Fund Member to understand the differences between pension payout with adjustment according to the consumer price index change rate and pension payout without adjustment, including a clear description of inflation risks and potential consequences for the pension beneficiary in the event of choosing pension payout without adjustment under conditions of high or rising inflation. The Company is additionally expected to inform the Fund Member of the possibilities and conditions under which it is subsequently possible to change the chosen option regarding the form of pension payout (with and without adjustment) in accordance with Article 116, Paragraph 3 of the Act, and to briefly provide all relevant information on how the subsequent change of the chosen form of pension payout affects the pension payments from the pension contract, while directing them for more detailed information on this matter to the manner in which such information can be made available to them (e.g., by contacting the Company, directing to the place on the Company's website containing such data, etc.).

In this regard, it is advisable and desirable for the Company to use a format that is easy to read and comparable (e.g., using tabular displays) to facilitate easier comparison and identification of basic differences, and thus risks associated with choosing a specific pension program and different options within that program.

The Company is expected to include in the description of pension programs the data on the amount of fees to which the Company is entitled, stating the legal basis for the same.

4. Warning to the Member of Mandatory Pension Insurance Regarding the Nature of the Informative Pension Calculation, and Necessary Explanations Regarding Facts and Circumstances Upon Which the Final Informative Pension Calculation Depends

The Company is expected to clearly and unequivocally state the following circumstances in the informative pension calculation itself:

• that the prepared informative pension calculation covers only the pension from mandatory pension insurance based on individual capitalized savings;
• that in order to realize the right to pension payout from the Company, a pension contract must be previously concluded with the Company;
• that the prepared calculation is not final because the final pension amount, which will be agreed upon and stated in the pension contract to be concluded with the selected Company when the legal conditions for this are met, will differ from the pension amount stated in the informative pension calculation (it can be higher or lower) due to the passage of time, during which at least the following changes may occur: • The value of the total accumulated amount of funds in the Fund Member's personal account in the pension fund, which is transferred as a payout to the Company's account, is expressed in accounting units whose value is determined in accordance with the value of accounting units on the date of closing the Fund Member's personal account in the pension fund. Over time from the receipt of the informative pension calculation by the Fund Member to the transfer of accumulated funds to the Company's account, it is very likely that the values of the accounting units in which the total accumulated amount of funds in the personal account in the pension fund is expressed will change relative to the status on the date of preparation of the informative pension calculation; • Companies have the right, depending on changes in market conditions, from the preparation of the informative pension calculation to the conclusion of the pension contract with the potential pension beneficiary, to change the conditions of the pension programs they distribute at the time of preparing the informative pension calculation (e.g., the Company has the right to change the calculation bases for pension calculations, due to which the pension amount stated in the informative pension calculation for the same form of pension payout may change or be higher or lower due to changed conditions); • The Company has the right to introduce new forms of pension payout with which it will begin distribution after the preparation of the calculation, and the pension amount by choosing that form of pension payout when concluding the pension contract with the Company may differ from the offered pension amounts in the informative pension calculations, with the emphasis that there are cases prescribed by Law when the potential pension beneficiary does not have the right to choose among all options of pension programs distributed by the Company, but has a restricted right of choice.

The Company is expected to explain to the Fund Member, upon such request, in simple and easily understandable language, the reasons why certain options of pension programs currently distributed by the Company are not applicable to that Fund Member.

5. Disclaimers of the Company Regarding Prepared Informative Pension Calculations Based on the Precision of Such Calculations and Reasons for Such Disclaimers

The Company is expected that the informative pension calculation clearly and unequivocally contains all disclaimers and limitations regarding the precision of informative pension calculations with the stated brief and clear descriptions of the reasons for these disclaimers.

The Company is expected that the descriptions of reasons, in addition to being brief and clear, are simple and easily understandable, so that the Fund Member understands and is aware of the fact that the prepared informative pension calculation is of an informative nature and that the final pension calculation is influenced by a number of factors that the Company cannot fully predict or eliminate in advance.

In this regard, the Company is primarily expected that the informative pension calculation clearly and unequivocally contains an explanation that it is provided based on data obtained from the Fund Member themselves, with which the Company does not possess nor is able to verify the accuracy of the obtained data, for which reason the Fund Member themselves bears responsibility for the accuracy and completeness of the provided data on the basis of which the informative calculations are prepared. This circumstance must be clearly highlighted both when collecting data from the Fund Member themselves and when indicating it in the text of the informative pension calculation itself.

Furthermore, the Company is expected to further explain to the Fund Member that, among other things, given the possibility of subsequent changes in pension program options and the introduction of new options, as well as due to potential legal changes that may occur until the conclusion of the pension contract with the Company (as a consequence of the passage of time from the receipt of the informative pension calculation to the conclusion of the pension contract with the selected Company), the stated pension amount in the informative pension calculation can be taken by the Fund Member only and exclusively as informative, and not as final and unchangeable.

In addition to the aforementioned disclaimer in the sense of the data on which the informative pension calculations are based, the Company is expected that the prepared informative pension calculation contains at least the following clearly highlighted disclaimers with appropriate descriptions thereof:

• the pension amount in the informative pension calculation is presented with regard to the possibility of requesting a lump-sum payment from the total received payout in the amount of 20% and without that possibility. Given that legal provisions prescribe the condition for partial lump-sum pension payout, and the Company does not know at the time of preparing the informative pension calculation whether the pension beneficiary will have the right to partial lump-sum payout at the time of realizing the right to pension, the Company is expected to highlight a clear disclaimer regarding this circumstance and state the legal condition under which the condition for such payout can be realized, so that the potential pension beneficiary is not misled into believing that the Company must in any case enable the stated payout in the requested amount;

• additionally, the pension amount in the informative pension calculation is presented with regard to the possibility of requesting a partial lump-sum payment from the total received payout in the amount of 20% and without such payout, while the range of partial lump-sum payment can, if the pension beneficiary has the right to it, be chosen in a range up to 20%. For this reason, the Company is expected to highlight a clear disclaimer in the informative pension calculation that the pension amount to be paid to the pension beneficiary based on the concluded pension contract will differ depending on the specifically chosen amount of partial lump-sum payment from the total received payout, if the pension beneficiary has the right to it. If the percentage of the chosen partial lump-sum payment of the total received payout is lower, the pension will be higher, and vice versa;

• the pension amount in the informative pension calculation is presented with regard to the possibility of contracting a guaranteed period, and that in the minimum and maximum possible duration depending on the current rules of the Company. Given the possibility of contracting a different duration of the guaranteed period, which is contracted in full years, and within the stated minimum and maximum duration of the guaranteed period, the Company is expected to disclaim in the informative pension calculation in such a way that it is clearly stated that the choice of the pension beneficiary regarding the duration of the guaranteed period, if contracted, will have an impact on the amount of pension to be paid to the pension beneficiary. Namely, if the pension beneficiary contracts a longer duration of the guaranteed period (than the minimum shown in the informative calculation), the contracted pension amount will be lower than shown in the informative pension calculation, and the stated amount will decrease with the choice of a longer time period as guaranteed;

• the Company is expected to disclaim in the informative pension calculation in such a way that it is clearly stated that a difference in the pension amount that will be agreed upon and stated in the pension contract with the selected Company compared to the pension amount stated in the informative pension calculation can also occur in the case where the Company will be obliged by legal provisions to offer a lump-sum payment of unpaid pensions to which the pension beneficiary has the right due to the passage of time from the moment of realizing the right to pension from mandatory pension insurance based on intergenerational solidarity to the beginning of pension payout from mandatory pension insurance based on individual capitalized savings based on the pension contract with the Company, and which pension amount, depending on the choice of the pension beneficiary, may or may not be paid as a lump-sum with the payment of the first pension amount;

• the Company is expected to disclaim in the informative pension calculation in such a way that it is clearly stated that changes may occur on the side of the potential pension beneficiary as well as members of their family (spouse/ex-spouse and/or life and informal life partner, child) due to the passage of time, which can have an impact on the amount of pension to be paid to the pension beneficiary based on the pension contract with the Company. The Company is expected to list, for example, specific changes in the informative pension calculation that affect the change in pension calculation (e.g., change in the age of the Fund Member, especially if the informative pension calculation is prepared based on data on the age of the Fund Member at the time of preparing that calculation, change in the employment status of the spouse/ex-spouse and/or life and informal life partner, death thereof, majority of the child, etc.) with an explanation of how these are assessed at the time of concluding the pension contract with the Company, which can lead to changes in pension amounts as well as changes due to which the potential pension beneficiary may be obliged to conclude one of the prescribed forms of pension and will not have the right to choose among all offered forms of pension payout;

• the Company is expected to disclaim in the informative pension calculation in such a way that it is clearly stated that all expressed pension amounts as well as the partial lump-sum pension payout are expressed in gross amounts and are taxable as income from non-independent work in accordance with tax regulations, consequently to which changes may also occur on the basis of the displayed pension amounts in informative pension calculations and the actually paid pensions. In this regard, the Company is expected to direct potential pension beneficiaries to contact the competent tax administration for further information regarding the method and amount of taxation of pension payout;

• the Company is expected to ensure that the pension amounts stated in the informative pension calculation are in accordance with and