The aim of this paper is to define the main features of the second pillar of pension insurance in Croatia. Emphasis will be placed on the work and role of mandatory pension funds from their beginnings until today, since they are a key factor in capitalizing second pillar funds. The legal investment opportunities and returns that the funds generate for the benefit of members will be presented and analyzed in the paper. The reform in 2002 introduced a capitalized savings method in the form of second and third pillar of pension insurance to make the system financially viable and to arouse people's responsibility for savings and reduce public responsibility for pensions. The success of the reform depended on a number of factors that directly affect the pension system. Significant difficulties in the system have arisen due to unfavorable demographic trends and high pension expenditures, and the main factor that has influenced the problems in the system is the ratio of the number of insured persons and pension beneficiaries. In Croatia, this ratio is among the worst in the European Union. The paper will also outline the problems affecting the pension system, as well as the second pillar of the pension insurance and affecting its sustainability. Special attention should be paid to the conducted survey that tried to determine the familiarity of citizens with the second pillar of pension insurance and the work of pension funds. The main aim of the survey was to examine and evaluate citizens’ pension literacy about the second pillar of pension insurance, and to identify their views on life in old age and the long-term planning of their own savings for old age.