Precautionary Liquidity and Worker Decisions: Evidence from French Employee Saving Plans

This paper investigates the demand for precautionary liquidity versus commitment contracts among participants in employer-sponsored retirement saving programs in France. All firms in the sample offer medium-term investments; they cannot be accessed for five years. Some also offer long-term (LT) investments, which cannot be accessed until retirement. If a plan offers LT investments, its auto-enrollment default must include them. Workers who experience changes in access to LT investments as a result of job changes are about 6 percentage points less likely to take up the plan default option, and 3 percentage points less likely to participate in the plan at all, when exposed to LT investments. We interpret this as a preference for precautionary liquidity, but two-thirds of active choosers still allocate some contributions, although less than the default, to LT investments, consistent with demand for partial commitment.