The International Monetary Fund (IMF) has advised Croatia to limit its “numerous early retirement options”.

The suggestion was made in its Republic of Croatia: Staff Concluding Statement of the 2025 Article IV Mission, where it stated that pension reforms are essential to raising adequacy, improving intergenerational equity, and ensuring long-term sustainability.

The IMF said Croatia’s pension system is already facing large deficits; therefore, measures to increase pension adequacy should be accompanied by policies to ensure the long-term financial sustainability of the system.

“Priorities include narrowing the numerous early retirement options, raising the retirement age and linking it to life expectancy, and increasing the minimum contribution years,” its report stated.

Despite this, the report praised the new Pension Insurance Law, which aims to improve pension adequacy.

More broadly, the IMF highlighted that the Croatian economy has continued to grow rapidly, still among the highest in the euro area. However, it warned of imbalances, which need to be curtailed.

“The fiscal stimulus during strong economic growth has led to rising fiscal deficits and exacerbated domestic demand pressure, contributing to higher inflation and current account deficit,” the report stated.

It concluded that “vigilance and close monitoring” are warranted to preserve financial stability.

“Now is also the time to deepen reforms to sustain Croatia’s convergence to advanced Europe and put Croatia in a stronger position to respond to future shocks and challenges,” it stated.

In the recent Mercer CFA Institute Global Pension Index 2025, Croatia’s pension system was awarded a B grade.

The system underwent a major reform in 2002, creating a three-pillar pension system. The first pillar comprises mandatory contributions of 15 per cent of salary, resulting in a defined benefit (DB) pension paid on retirement.

The second pillar is defined contribution (DC), where employees contribute 5 per cent of their salary into an individual pot from which members draw a retirement pension. There is also a voluntary pension fund to which members can choose to contribute.

In alignment with the IMF, the Mercer CFA Institute report said its score could be improved by increasing the labour force participation rate, particularly at older ages, as life expectancies rise.

In addition, it also recommended increasing the minimum level of support for the poorest aged individuals.

Within private pension plans, it said the country should increase the level of funded contributions in private pension plans, thereby increasing the level of assets over time.

Lastly, it said arrangements to protect the interests of both parties in a divorce should be introduced, and it quoted updated economic growth data published by the IMF as its argument for this.

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