Precautionary Liquidity and Worker Decisions in French Employee Saving Plans

Marie Brière (), James Poterba and Ariane Szafarz

No 29601, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates the demand for precautionary liquidity versus commitment contracts among participants in retirement saving programs. It analyzes administrative data from the largest workplace saving plan provider in France, a country in which employers have wide discretion in structuring these plans. All plans must offer medium-term investments, which cannot be accessed for five years. Most also offer long-term investments, which cannot be accessed until retirement. All plans feature auto-enrollment; when a plan offers long-term investments, they must be included in the plan default. Take-up of the default option and overall plan participation rates are both lower when the plan offers long-term investments, suggesting that on balance, workers prefer medium-term to long-term investments. Nevertheless, two-thirds of those who make active choices—opt out of the default—at firms that offer long-term investments choose to allocate at least some of their contributions to them. Most contribute less than they would have by accepting the default. The findings suggest that while contributors are reluctant to forego access to their accounts completely, they nevertheless value commitment contracts.

JEL-codes: G41 G5 G51 H24 J14 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-age, nep-eur and nep-lab
Note: AG PE
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Citations: View citations in EconPapers (3)

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