Financing mandatory pension insurances, as one form of mandatory social security, has became a serious problem. Due to the changes in the demographic structure of population caused by ageing of population, contributions for social insurance paid by employees and their employers are not sufficient for the pension expenditures. The dependency ratio has increased so a reduced number of employees should pay contributions for constantly increasing number of pensioners, which received pensions for a longer period. Such a gap between financial needs of the retired population and insufficient contribution for their financing is covered by tax revenues. As a consequence of such trends, contributions became more and more similar to taxes. Thus, by the designing of the system of mandatory contributions, there are the same requirements as by designing of the tax system. Besides these measures, a significant number of states have introduced a model of pension insurance based on personal pension accounts. This thesis explains the differences in functioning of each of the mentioned pension systems. It is believed that pension insurance of individual savings performs two functions: it stimulates economic growth and it insures the financial sources for pension expenditures Developed countries reacted significantly earlier to demographic and financial problems of their pension systems. The examples of USA, UK, Germany, Switzerland and Sweden show that very advanced economies are also forced to restructure their pension insurance systems. Middle and East European transitional countries, besides all problems of demographic changes, were forced to restructure their pension insurance systems simultaneously with reshaping of their general political and economical system. The Republic of Croatia is in an identical situation. Due to the historical legacy and the influence of the world financial institutions, the Croatian pension system is very similar to the pension systems of other European transitional countries. Since 2002, Croatia has two forms of mandatory pension insurance: PAYGO system of intergeneration solidarity (first pillar) and pension insurance based on personal pension accounts (second pillar). All employed persons are obliged to be insured in pension insurance system. The contribution rate for mandatory pension insurance in Croatia is 20% and is not among the highest rates that have states in European surrounding. However, having in mind the total labour cost burden caused by all mandatory payments, total outlays for the social security in Croatia are higher than the average for countries members of OECD. All insured persons pay the same rate, but for persons insured in the second pillar the contribution is divided into two parts: 15% for the first and 5% for the second obligatory pillar. The bases for payment of pension contribution are stipulated variously for different groups of insured persons, in the scope of 0.35 to 6 average salaries obtained in period January – August of previous year. Although the contribution rate is identical for all insured persons, unequal contribution base for calculation of pension contributions causes different fiscal burdens to various groups of insured persons. The survey shows that the same amounts of income are burdened differently with pension contribution. Employees are the biggest group of insured persons and in the analysed period from 2003 to 2007, for each 100 units of income, they paid on average HRK 24.54 mandatory pension contributions. The self-employed are significantly less burdened with pension contributions. Self-employed taxpayers of personal income tax in the same period paid on average HRK 18.56 mandatory pension contributions for each 100 units of income paid, while self-employed taxpayers of company income tax on average paid only HRK 5.00 mandatory pension contributions. In these circumstances, the self-employed pay only one third of the total obligation for pension contributions. The share of self-employed in the structure of revenues from pension insurance contribution is disproportional to their share in total number of insured persons. In year 2008, the share of self-employed in total number of insured persons was 8.6%, while from them was collected only 1.7% of total revenues from pension insurance intergenerational solidarity. The survey shows that in the previous period the Tax Administration obtained better results in collection of contributions for the 1st pillar in comparison to contributions for the 2nd pillar. For the period from 2002 to 2007, the estimation of non-realised revenues from pension contributions for the 1st pillar was in the range from 8% to 19% of collected contributions. In the mentioned period for the 2nd pillar the estimation of non-realised revenues from pension contributions was on average 32% of the total sum that should be paid. For second pillar it has been collected little bit more than two thirds of all contributions that should have be paid on personal accounts of insured persons. The effective paid contribution rate for the second pillar is only 3.7%. It is especially worrisome that for more than 250.000 insured persons in the second pension pillar, contributions are irregularly paid. Besides retaining the current rate of obligatory contribution for the second mandatory pillar, in the future there is a need to expect the lower percentage of the share of average pension in the average salary. The replacement rate will fall. This imposes the obligation to re-examine current rights in the mandatory pension insurance and way how to finance these rights. Measures for the improvement of the fiscal and social effects of mandatory systems basically consist of sustainable increase of revenues for financing the pensions and rationalisation of pension expenditures. this is of growing importance to insure a higher level of equity in the phase of pension contribution collection as well as in the phase of realizations of pension rights. In the combined model of pension, insurance measures must be planned integrally, not just for both pension insurance systems, but also in respect to the totality of the social and economic conditions. Although the second pillar by its nature insures stronger link between paid contributions and pension rights, there is also a necessity to enhance mentioned link between paid contribution and the amount of pension in the first pillar. This can be achieved by gradual increase of legally stipulated retirement age as a precondition for obtaining pension rights, the stronger stimulating of later retirement and elimination of financial burden of privileged pensions. Additionally, pension insurance system of intergenerational solidarity should be complemented by higher level of protection for insured persons which were due to the legal regulation or by their own decision, are insured in the second pillars.