Severance pay: we help you decide where it should go

A decision you make once, and one that is worth tens of thousands of euro over a career. We work it out on your own figures, not on a general rule.

In short

  • Severance pay left with the employer is revalued by a fixed 1.5% plus 75% of inflation, and on payout it is taxed at a rate that typically starts at 23%.
  • Allocated to a pension fund it is invested in a line chosen to match your time horizon, and the final benefit is taxed at 15%, down to a minimum of 9%.
  • Many collective agreements also trigger an employer contribution when you join: where it exists, it shifts the decision more than anything else.
  • We reconstruct your accrued severance pay, compare the two routes on real historical returns and give you a figure, not an opinion.

What is severance pay, and why does this choice matter?

Trattamento di Fine Rapporto — Italian severance pay, usually shortened to TFR — is the share of salary, 6.91% of gross annual pay or roughly one month's wages, that your employer sets aside for you and pays out when the employment relationship ends. Every employee decides where it should go: leave it with the employer, or allocate it to a supplementary pension scheme.

The decision must be made within six months of being hired. If you do not make it, silent consent makes it for you and severance pay is allocated to the fund named in your collective agreement. It is worth facing for two reasons: it concerns a sum that easily reaches six figures over a career, and it is not symmetrical. Severance pay allocated to a pension fund does not come back.

What happens if it stays with the employer?

The capital is revalued each year under a formula set by law: a fixed 1.5% plus 75% of inflation. When inflation is low, growth is very modest; when it is high, the formula recovers only three quarters of it. Being predictable is its virtue: it protects partially, but it does not fluctuate.

On payout, separate taxation applies, at a rate calculated on the average of your income in recent years that normally starts at 23%. There is also a point that is often missed: above a certain employee count severance pay does not in fact stay with the employer, but flows monthly into the Treasury Fund managed by INPS, the Italian social security institute. Since 2026 that threshold is no longer fixed: it is checked every year against the previous year's average headcount, and a gradual step-down is already set by law — 60 employees from 2026, 50 from 2028, 40 from 2032. In that case the argument that it "stays available to my business" simply does not apply.

What changes in a pension fund?

The same flow is invested in a line you choose, from the most cautious to the most dynamic, according to how many years are left before retirement. The return is not guaranteed, but over long horizons it is the whole reason supplementary pension schemes exist.

The most underestimated advantage, though, is the tax one. The final benefit is taxed at 15%, reduced by 0.30% for each year of membership beyond the fifteenth, down to a minimum of 9%. Set against the 23% starting point for severance pay held by the employer, over a long career this is the heaviest item of all — heavier than the return itself.

Finally there is the employer contribution: many collective agreements provide that if the employee pays a share into the fund, the company pays its own share too. It is additional pay that you give up by standing still.

Who it is for

When is this calculation worth running?

It is not a question only for people who have just been hired. These are the situations in which we see it come up most often.

It has sat with your employer for years

You have never worked out what it is actually earning you, while the statutory revaluation has been running at its minimum.

You have just been hired

You have six months to decide. Let the deadline pass and silent consent decides, without your having seen the alternatives.

You are considering an advance

First home, renovation, medical costs: the rules for obtaining an advance differ considerably depending on where your severance pay sits.

You are changing jobs

A move reopens the choice, and it is also the moment when an existing pension position is most easily lost track of.

What changes in practice

The four numbers the decision rests on

1.5% + 75% Annual revaluation of severance pay left with the employer: a fixed share plus three quarters of inflation
23% The rate at which separate taxation on employer-paid severance pay typically starts
15% → 9% Taxation of the pension fund benefit, falling by 0.30% a year beyond the fifteenth
60 → 40 The employee threshold above which severance pay flows to the INPS Treasury Fund, stepping down from 2026 to 2032
How we work

From payslip to decision, in five steps

None of these steps require you to have made up your mind already. All they need is paperwork you already have at home.

  1. 01

    We reconstruct what has accrued

    From your payslips and latest statement: how much you have set aside so far and how much you add each year.

  2. 02

    We read your collective agreement

    We check whether it provides an employer contribution to the fund, and on what conditions it is triggered.

  3. 03

    We compare on real data

    Statutory revaluation against historical returns of the investment lines, over your horizon, not on generic averages.

  4. 04

    We calculate the final tax

    This is where the widest gap between the two routes sits: we quantify it in euro on your own position.

  5. 05

    We formalise and review

    We handle the paperwork and the choice of investment line with you, and revisit it when your horizon changes.

The mistakes we see most often

Three ways this decision goes wrong

Leaving it where it is without ever doing the maths

This is the most common outcome and almost never the considered one. In most cases staying with the employer was not chosen: it simply happened, and nobody ever set the two routes side by side.

Giving up the employer contribution

Where the collective agreement provides one, not joining means leaving on the table a share of pay you would be entitled to. It is the only part of the decision worth money immediately, and it should be checked before anything else.

Looking only at the return

Between the two routes the widest difference is fiscal, not financial. A comparison that stops at returns leaves out the heaviest item of all, and often leads to the wrong conclusion.

What is the gap between the two routes worth, in euro? Our simulators compare severance pay left with the employer against a pension fund on real historical returns, and calculate the tax advantage at your own rate.
Go to the simulators →
Frequently asked questions

What we are asked most often about severance pay

It depends on how many years are left before retirement, on your tax rate and above all on your collective agreement: where it provides an employer contribution triggered by joining the fund, the pension fund is almost always the better option. Without that contribution the decision comes down to comparing the statutory revaluation with the return of the investment line, and to the difference in final taxation. It is a calculation to run on your own figures, not on a general rule.
Silent consent decides for you. Six months after you are hired, if you have made no explicit choice, severance pay is automatically allocated to the supplementary pension scheme set out in your collective agreement. That is not a neutral outcome: it is a decision taken by inertia, often without knowing which investment line the capital ends up in.
No. Allocating future severance pay to a supplementary pension scheme is not reversible: capital already paid into the fund stays there and does not return to the employer. You can transfer the position to a different pension fund, but you cannot move the severance pay back. That is precisely why this decision deserves a proper comparison beforehand.
Severance pay paid out by the employer is subject to separate taxation, at a rate linked to the average of your income in recent years, which typically starts at 23%. The pension fund benefit is instead taxed at 15%, reduced by 0.30% for each year of membership beyond the fifteenth, down to a minimum of 9%. Over a long career the gap between those two rates is the single heaviest item.
Yes. Supplementary pension schemes allow advances for extraordinary medical expenses, for buying or renovating a first home and, after eight years of membership, for further needs with no obligation to state a reason. The percentages available and the tax applied vary by category, and they do not match the rules that govern an advance on severance pay held by the employer.

Didn't find your question? Write to us directly — we answer personally.

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Your contact for pensions and severance pay

Elena Ceccato Abbamonte
Contact

Let's talk over a coffee

Bring your latest payslip and your severance pay statement: in one meeting we put the two routes side by side, on your own figures and with no commitment.

Office
Via delle Terme 2, 31029 Vittorio Veneto (TV), Italy
Phone
+39 327 558 4213
Email
vittorioveneto.p13@allianzbankfa.it
Opening hours
9:30 – 12:30
15:00 – 18:30