A Sixty-Day Deadline for Severance Decisions
New employees in Italy now face a narrow 60-day window from their start date to decide the destination of their Trattamento di Fine Rapporto (TFR), or severance pay. Under updates to the 2005 supplementary pension regulations, failing to make an active choice within this two-month period triggers an automatic transfer of funds into a designated pension scheme.
Shifting Capital from Corporate Coffers
The TFR acts as a deferred salary, roughly equivalent to one month’s pay per year, traditionally held by the employer as a form of corporate self-financing. Since the enactment of Legislative Decree No. 252/2005, the Italian government has pushed to move these assets into supplementary pension funds.
The Accelerated ‘Tacit Consent’ Rule
Approved in December 2023, the recent budget law slashed the "tacit consent" (silenzio-assenso) window from six months to just 60 days. If a new hire fails to opt for keeping their TFR with their employer—where company size allows—or with the INPS treasury fund, the employer is now required to automatically enroll them in the pension fund dictated by their Contratto Collettivo Nazionale di Lavoro (CCNL).
Navigating Market Volatility
Unlike funds held by an employer or the INPS, which are protected by inflation-linked adjustments, money moved to pension funds is exposed to the fluctuations of the financial market. These funds are managed by institutional entities such as banks, insurance companies, and asset managers like Allianz, Amundi, or BlackRock. Performance depends on the chosen "compartment," where higher-risk portfolios offer greater potential returns but also carry the risk of capital loss.
Tax Advantages for Long-term Growth
To incentivize this shift, the state offers a favorable tax structure. While TFR kept in a company or with the INPS is taxed at a standard rate of approximately 23%, assets held in a supplementary pension fund for an extended period can see that tax rate drop to as low as 9%.
Key Considerations for Employees
- Can I choose where my TFR goes? Yes. You have 60 days to decide between leaving it in the company (if eligible), the INPS treasury, or a specific supplementary pension fund.
- What happens if I don’t choose? Your employer will automatically assign your TFR to the pension fund identified in your national labor contract (CCNL).
- Is my money guaranteed? TFR held by an employer or the INPS is protected by inflation adjustments. Money in a pension fund is invested in financial markets and carries the risk of loss, though it also offers the potential for higher returns.
- Are there costs involved? Yes. Pension funds charge management fees, which vary depending on the fund and the selected investment compartment.
Related reading