The pension system, social welfare and other social programs are integral elements of the social security system, the primary goal of overcoming social risks, realization of social justice and social solidarity necessary for the maintenance and development of society. Social security systems are fundamentally financed by contributions and taxes, or by a secondary income distribution, in which isthe central role of the state. Social security in society depends on the state of the economy, as well as the economy can hardly develop without the required level of social security of citizens. The pension system today is in a very difficult state due to the economic crisis, demographic changes, mass unemployment, labor flexibility, and so on. The primary objective of this paper is to explore the issue of pension funds in Croatia and to try to explain the importance of pension funds for the development of capital markets in the Republic of Croatia on the one hand and the importance of pension funds to increase living standards on the other. The results show that it is to be expected that pension funds will continue to grow as the population is old. It is also expected that pension funds will have more and more power over companies as the number of stocks under their control increases. For this reason Iit is necessary that the state starts to attract foreign investment so that funds can invest in the country where they operate. For now, the situation is not satisfay. The ratio of workers and retirees is all the more unfavorable. If such trends continue, the pension system will become unsustainable by the end of next year, as the number of pensioners and retirees will be fully equalized.