Every employee in Italy builds up TFR — Trattamento di Fine Rapporto, often called severance or end-of-service pay. Each year your employer sets aside roughly one month's salary into this pot, and you receive it when you leave the job. But there is a decision most workers face early in their career that quietly shapes how much they end up with: do you leave your TFR in the company, or move it into a supplementary pension fund?
This guide explains both options as they stand in 2026, the trade-offs, the tax differences, and how to think about the choice. It is not financial advice, but it should help you ask the right questions.
How TFR Works in the First Place
Each year your employer puts aside an amount equal to your annual gross salary divided by 13.5 (about a month's pay), minus a small social security charge. That money is your TFR. While it sits with the company, it is revalued each year by a fixed 1.5 percent plus 75 percent of the rise in the cost of living (the ISTAT inflation index). You can estimate how your pot grows over time with our TFR calculator.
When you change jobs or retire, the accumulated TFR is paid out as a lump sum. For many Italians it is the single biggest cash payment of their working life, so what happens to it matters.
Option One: Leave It in the Company
If you do nothing, your TFR stays with your employer (or, for firms with 50 or more staff, is transferred to a special INPS fund) and grows at that guaranteed 1.5 percent plus 75 percent of inflation. The main attractions are:
- Guaranteed growth. Your pot cannot fall in value; the revaluation formula only ever adds to it.
- Access on leaving. You receive it when you leave the job, and you can request advances (anticipazioni) for things like buying a first home or major medical costs.
- Simplicity. There is nothing to choose, monitor or manage.
The downside is that in years of higher inflation, the formula tends to lag real price rises, and over a long career a guaranteed but modest return can fall behind what invested markets might deliver.
Option Two: Move It to a Pension Fund
Alternatively, you can direct your future TFR into supplementary pension provision (previdenza complementare) — either a closed/category fund (fondo negoziale), an open fund (fondo aperto), or an individual pension plan (PIP). Your TFR is then invested in a chosen line, from low-risk guaranteed lines to higher-risk equity lines.
The potential advantages are significant:
- Employer contribution. With many category funds, if you also pay in a small amount yourself, your employer adds a contribution too — effectively free extra money you do not get by leaving TFR in the company.
- Lower tax at the end. TFR paid out from a pension fund is taxed at a final rate that falls from 15 percent down to as low as 9 percent the longer you stay in, compared with the separate taxation (tassazione separata) on company TFR, which is linked to your average IRPEF rate over recent years and is usually higher.
- Tax-deductible personal contributions. Any extra you pay into the fund yourself is deductible from your IRPEF income up to an annual limit, reducing your tax bill now.
- Investment growth potential. Over decades, an equity-leaning line may outpace the company revaluation formula.
The trade-offs are real too: investment returns are not guaranteed and can fall, access before retirement is more restricted, and you need to choose and review an investment line. Our INPS calculator can help you see your wider contribution picture alongside this choice.
The Tax Difference in Practice
The tax treatment is often the deciding factor. Company TFR is subject to tassazione separata, broadly based on your average IRPEF rate in the years before payout — which for most workers sits somewhere between 23 and 35 percent. Pension-fund TFR, by contrast, is taxed at a flat 15 percent that reduces by 0.3 percent for each year of membership beyond the fifteenth, down to a minimum of 9 percent.
Over a long career that gap is large. On a TFR pot of, say, €60,000, the difference between a 23 to 35 percent rate and a 9 to 15 percent rate can easily be €5,000 to €12,000 of tax. That is real money that stays in your pocket.
An Important One-Off Decision
There is a catch you must understand: the choice to move TFR into a pension fund is, in most cases, irreversible once made. You can switch which fund you use, but you generally cannot move accumulated pension-fund TFR back into the company. By contrast, if you leave TFR in the company you can later decide to start sending future TFR to a fund. Because of this, new employees are given a window (normally six months from starting) to decide, and silence is often treated as a "tacit" choice to join a fund under some arrangements.
Who Each Option Suits
Leaving TFR in the company tends to suit people who value certainty above all, who are close to leaving the workforce, or who may need the advances for a near-term goal. Moving it to a pension fund tends to suit younger workers with a long horizon, anyone whose employer adds a matching contribution, and those comfortable with some investment risk in exchange for lower end-tax and growth potential.
If you are self-employed there is no TFR at all, since it is an employee entitlement — but supplementary pension funds are still open to you, and our self-employed tax calculator can help you plan your own retirement saving. If you are comparing job offers, remember the TFR builds on your full gross including the tredicesima, so our salary calculator is a useful starting point.
The Bottom Line
Your TFR is one of the biggest financial decisions you make in Italy, even though it often passes without much thought. Leaving it in the company gives you guaranteed, modest, tax-heavier growth. Moving it to a pension fund offers a possible employer match, tax-deductible top-ups, lower final tax of 9 to 15 percent, and the chance of stronger investment growth — at the cost of investment risk and an irreversible decision.
There is no single right answer; it depends on your age, your employer's scheme, and your appetite for risk. The smart move is to model the numbers before you decide. Start with our TFR calculator to see how your pot is likely to grow, then weigh the tax saving a pension fund could offer over your remaining working years.