Pension insurance in Republic of Croatia is a part of social security. The development of the pension system in recent Croatian history has been implemented through pension reforms in 1999. and 2002. A pension system consists of three pillars of pension insurance. The first and second pillars are obligatory, but the first pillar is based on generational solidarity, while the second pillar is based on individual capitalized savings. The third pillar, just like the second one, is based on individual capitalized savings, but the difference between them is that third pillar is voluntary. The Croatian Pension Insurance Institute is a public institution that provides pension insurance in the Republic of Croatia. In the Republic of Croatia insured persons have the opportunity to invest in obligatory and voluntary pension funds. If they decide to invest in obligatory pension funds, they have option to choose in which of three categories A, B or C they want to invest. The functioning of the pension system is extremly important for society because it brings security to the elderly population. The contributions of employee are not enough to cover pension insurance expenditures, so the Croatian pension system cannot operate independently so it needs financial help of the state and this brings problem of sustainability of the pension system.