TFR: keep it with your employer or move it to a pension fund?

What your TFR is worth

TFR (trattamento di fine rapporto) builds up each year at roughly 6.9% of your gross pay. On a €35,000 gross salary that's about €2,400 a year: over a thirty-year career, before any returns, more than €70,000. It's not a detail, it's a significant part of your future wealth.

Option 1: keep TFR with your employer

• Return: TFR is revalued each year by a fixed 1.5% plus 75% of inflation. It's a predictable return with no ups and downs, but in real terms it stays close to zero or slightly above.
• Tax: the annual revaluation is taxed at 17%; when paid out, TFR is taxed separately at an average income tax rate starting from 23% and rising with income.
• Liquidity: you receive it when your employment ends, including when you change jobs. After 8 years you can ask for an advance of up to 70% for medical costs or to buy your main home.

At companies with 50 or more employees, TFR not paid into a fund is transferred to an INPS treasury fund, but the rules for you stay the same.

Option 2: move TFR to a pension fund

• Return: depends on the investment option you choose, from guaranteed to equity. Over the long run, options with more equities have historically outperformed the TFR revaluation, with significant swings along the way.
• Tax: returns taxed at 20% (12.5% on government bonds) and the final benefit at 15%, falling to 9% with years of membership. Almost always less than with your employer.
• Employer contribution: in industry-wide (negoziale) funds, if you also pay a minimum contribution, your employer adds its own. Leave TFR with the company and you lose it.
• Liquidity: this is the weak spot. The money stays in the fund until retirement, apart from advances, redemptions and RITA. I cover this in detail in the guide pension fund or investment plan.

What changed on 1 July 2026

Under the 2026 Budget Law, new hires in the private sector are now automatically enrolled: unless you state otherwise within 60 days of being hired, your TFR and contributions go to the pension fund set by your employment contract. So if you're newly hired, doing nothing now means choosing the pension fund. Better to make that choice deliberately.

How to choose a fund

1. Start with the industry-wide fund for your employment contract: it's usually the cheapest and the only one that gives you the employer contribution.
2. Compare costs using the ISC (synthetic cost indicator) that COVIP publishes for every fund. Open pension funds and especially insurance-based PIPs can cost a lot more. The reasoning is the same as in the guide on fund fees.
3. Choose the investment option by the years you have left, not by market mood. With twenty years or more ahead, a guaranteed option risks returning less than inflation. Many funds offer "life-cycle" paths that reduce risk as you approach retirement.

So, which is better?

For most employees, moving TFR into a low-cost industry-wide fund, and adding the minimum contribution to unlock the employer's, is the most efficient choice. There are exceptions: people who expect to need the money soon for a home, people who want to stop working very early and need liquidity, and people close to retirement with little time to recover from swings.

If you want to stop early, TFR needs to be part of the plan alongside your state pension and your free portfolio. Start with the guide when can I retire.