An Empirical Assessment of the Italian Severance Payment

The Italian TFR ("Trattamento di fine Rapporto") is a statutory payment made by firms to staff on separation. Recent reforms of the national pension system are based on voluntary transfers of the TFR to a supplementary pension fund. The purpose of this paper is to provide a probabilistic distribution of how workers currently make use of their severance payment, on the basis of their demographic and occupational characteristics. We find that the TFR mainly acts both as a buffer stock and as an income source upon retirement.