Implementation of the voluntary fully funded pension insurance in Croatia in the course of compliance with EU Directives  ...
Croatian Pension System <ul><ul><li>Three pillar system </li></ul></ul><ul><ul><ul><li>Mandatory pension insurance based  ...
Voluntary Pension Insurance <ul><ul><li>Voluntary pension insurance </li></ul></ul><ul><ul><ul><li>Open-end voluntary pens...
Voluntary Pension Insurance <ul><ul><li>Authorization and operation of voluntary pension funds </li></ul></ul><ul><ul><ul>...
Conditions for establishing VPF management company <ul><li>Equity capital 15 million HRK ,  paid in full before registrati...
Conditions for establishing and operating VPF <ul><li>VPF management company authorization </li></ul><ul><li>Articles of a...
Voluntary Pension Insurance <ul><ul><li>Information to be provided to members and beneficiaries (information prospectus): ...
Voluntary Pension Insurance <ul><ul><li>Investment rules (voluntary pension funds) </li></ul></ul><ul><ul><ul><li>basic pr...
Voluntary Pension Insurance <ul><ul><li>Government incentives </li></ul></ul><ul><ul><ul><li>25% of contributions, 5.000 H...
Conditions for using the voluntary pension savings  <ul><li>Minimum 50 years of age </li></ul><ul><li>In case of disabilit...
Current situation <ul><ul><li>4 voluntary pension fund management companies </li></ul></ul><ul><ul><li>6 open-end voluntar...
Current situation  – Pension Funds
Current situation – Pension Funds
Voluntary pension funds – investment structure
Mandatory  pension funds – investment structure
Financial institutions – Total Assets
Institutions for Occupational Retirement Provision Directive (IORP) <ul><li>Internal market Directive </li></ul><ul><ul><l...
IORP directive <ul><li>Single licence, Home Member State supervision </li></ul><ul><ul><li>But: Host Member State supervis...
IORP <ul><li>Authorization </li></ul><ul><li>Legal separation from sponsor </li></ul><ul><li>Activities limited to ORP bus...
Closed-end PF Closed-end PF Employer and Employees Employer and Employees Relevant Social and labour law IORP Directive IO...
IORP - Croatia <ul><li>Applicable to closed-end VPFs </li></ul><ul><ul><li>Open-end VPFs – individual pension scheme, not ...
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Implementation of the voluntary fully funded pension ...

  1. 1. Implementation of the voluntary fully funded pension insurance in Croatia in the course of compliance with EU Directives Toni Lukšić Croatian Financial Services Supervisory Agency Regional round table - Skopje, Macedonia – 22.02.2007.
  2. 2. Croatian Pension System <ul><ul><li>Three pillar system </li></ul></ul><ul><ul><ul><li>Mandatory pension insurance based on generation solidarity (“pay-as-you-go” system); </li></ul></ul></ul><ul><ul><ul><li>Mandatory pension insurance based on individual capitalized savings; </li></ul></ul></ul><ul><ul><ul><li>Voluntary pension insurance based on individual capitalized savings </li></ul></ul></ul><ul><ul><li>Mandatory and voluntary pension insurance based on individual capitalized savings are Defined Contribution pension schemes. </li></ul></ul><ul><ul><li>The payment of pensions is the responsibility of Pension insurance companies. </li></ul></ul>
  3. 3. Voluntary Pension Insurance <ul><ul><li>Voluntary pension insurance </li></ul></ul><ul><ul><ul><li>Open-end voluntary pension funds </li></ul></ul></ul><ul><ul><ul><li>Closed-end voluntary pension funds where sponsor may be: </li></ul></ul></ul><ul><ul><ul><ul><li>an employer; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>a union; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>an association of self-employed persons </li></ul></ul></ul></ul><ul><ul><li>The only object of activity of a pension company is the establishment and management of pension fund. Voluntary pension company may only establish and manage voluntary pension funds (both open-end and closed-end types). </li></ul></ul>
  4. 4. Voluntary Pension Insurance <ul><ul><li>Authorization and operation of voluntary pension funds </li></ul></ul><ul><ul><ul><li>Authorization for establishment of pension company </li></ul></ul></ul><ul><ul><ul><li>Pension company is registered with the Trade Register </li></ul></ul></ul><ul><ul><ul><li>Agency issues operating license for establishment and management of a pension fund </li></ul></ul></ul>
  5. 5. Conditions for establishing VPF management company <ul><li>Equity capital 15 million HRK , paid in full before registration </li></ul><ul><li>Articles of association, info on founders, management and supervisory board </li></ul><ul><li>Organizational and financial plan </li></ul><ul><li>Conditions for management of the company </li></ul>
  6. 6. Conditions for establishing and operating VPF <ul><li>VPF management company authorization </li></ul><ul><li>Articles of association and prospectus </li></ul><ul><ul><li>Investment principles and restrictions </li></ul></ul><ul><ul><li>Fees (type, calculation and amount) </li></ul></ul><ul><ul><li>Information to the VPF member… </li></ul></ul><ul><li>Custody bank </li></ul><ul><li>VPF membership min. 200 </li></ul>
  7. 7. Voluntary Pension Insurance <ul><ul><li>Information to be provided to members and beneficiaries (information prospectus): </li></ul></ul><ul><ul><ul><li>information about pension fund (portfolio of the fund, method for calculating fees for the pension company and custodian bank etc.), pension company and custody bank. </li></ul></ul></ul><ul><ul><li>Information to be provided to the competent authorities: </li></ul></ul><ul><ul><ul><li>Audited annual financial statements, details of the sale and acquisition of a pension fund’s assets, information about fees, remuneration and salaries paid etc. </li></ul></ul></ul>
  8. 8. Voluntary Pension Insurance <ul><ul><li>Investment rules (voluntary pension funds) </li></ul></ul><ul><ul><ul><li>basic principles (safe investments, diversity of investments, maintenance of appropriate liquidity) </li></ul></ul></ul><ul><ul><ul><li>Quantitative restrictions (5% per issuer, 20% outside of Croatia) </li></ul></ul></ul><ul><ul><ul><li>Qualitative restrictions (credit rating of a securities issuer) </li></ul></ul></ul><ul><ul><ul><li>Forbidden investments (property, securities unlisted or not publicly traded, securities issued by pension company, custody bank or related person. </li></ul></ul></ul>
  9. 9. Voluntary Pension Insurance <ul><ul><li>Government incentives </li></ul></ul><ul><ul><ul><li>25% of contributions, 5.000 HRK per year sealing (1.250 HRK) </li></ul></ul></ul><ul><ul><ul><li>Tax exemption (personal income tax, exemption for life insurance, private medical insurance and voluntary pension insurance) </li></ul></ul></ul><ul><ul><ul><li>No incentives for companies (contributions to pension funds are treated as salary payments) </li></ul></ul></ul>
  10. 10. Conditions for using the voluntary pension savings <ul><li>Minimum 50 years of age </li></ul><ul><li>In case of disability, funds are available regardless of age </li></ul><ul><li>In case of death, the funds of the deceased fund member are transferred to his/her family </li></ul>
  11. 11. Current situation <ul><ul><li>4 voluntary pension fund management companies </li></ul></ul><ul><ul><li>6 open-end voluntary pension funds </li></ul></ul><ul><ul><ul><li>78.000 members, 419 million HRK in net assets </li></ul></ul></ul><ul><ul><li>10 closed-end voluntary pension funds </li></ul></ul><ul><ul><ul><li>Sponsoring undertaking (6 companies, 2 unions, 2 associations) </li></ul></ul></ul><ul><ul><ul><li>11.000 members, 65 million HRK in net assets </li></ul></ul></ul>
  12. 12. Current situation – Pension Funds
  13. 13. Current situation – Pension Funds
  14. 14. Voluntary pension funds – investment structure
  15. 15. Mandatory pension funds – investment structure
  16. 16. Financial institutions – Total Assets
  17. 17. Institutions for Occupational Retirement Provision Directive (IORP) <ul><li>Internal market Directive </li></ul><ul><ul><li>Art. 249 EC Treaty: Binding as to the result to be achieved </li></ul></ul><ul><ul><li>Scope: EEA (EU25 + NO, LI, IS) </li></ul></ul><ul><li>IORP is an institution (not a product): </li></ul><ul><ul><li>Established for the purpose of providing retirement benefits </li></ul></ul><ul><ul><li>Operates pension schemes for sponsoring undertakings </li></ul></ul>
  18. 18. IORP directive <ul><li>Single licence, Home Member State supervision </li></ul><ul><ul><li>But: Host Member State supervision for social/labour law + some information requirements </li></ul></ul><ul><li>Investments: Prudent person rule </li></ul><ul><ul><li>But: Host Member State may lay down more detailed rules, provided they are prudentially justified </li></ul></ul><ul><li>Cross-border membership </li></ul><ul><ul><li>IORPs may accept sponsorship from abroad </li></ul></ul><ul><ul><li>Undertakings may sponsor IORP abroad </li></ul></ul>
  19. 19. IORP <ul><li>Authorization </li></ul><ul><li>Legal separation from sponsor </li></ul><ul><li>Activities limited to ORP business or similar activities </li></ul><ul><li>Information to members: IORP, pension scheme and pension rights </li></ul><ul><li>Information to supervisor, e.g. investments </li></ul><ul><li>Relevant social and labor law – host MS </li></ul>
  20. 20. Closed-end PF Closed-end PF Employer and Employees Employer and Employees Relevant Social and labour law IORP Directive IORP Administration Asset mgt.
  21. 21. IORP - Croatia <ul><li>Applicable to closed-end VPFs </li></ul><ul><ul><li>Open-end VPFs – individual pension scheme, not under the IORP scope. </li></ul></ul><ul><li>Legal adjustments </li></ul><ul><ul><li>Cross-border activities </li></ul></ul><ul><ul><li>Investment limitations (risk capital markets) </li></ul></ul><ul><li>Amendments to the Act on Mandatory and Voluntary Pension Funds will be adopted in 2007. IORP provisions will be applicable when Croatia becomes an EU member state. </li></ul>
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