Liquidity and workplace pensions

Around the world, policy makers and researchers are launching a range of initiatives designed to encourage, on the one hand, short-term liquid savings, and on the other, illiquid savings for retirement. These two types of initiative are generally undertaken in isolation, implying a tension between liquid versus illiquid savings. The implicit message is that long- versus short-term savings is a zero-sum game, where each type of savings is competing for a fixed share of individuals’ assets.

About the project

More recent work has challenged this perspective. Researchers in the US have proposed an approach that combines liquid and illiquid savings in a way that’s optimised around the needs and preferences of the saver. The argument is that an appropriate balance of liquidity will enhance people’s overall financial wellbeing, both in the short term and through into retirement.

We aim to test the impact of a combined savings product, where a liquid ‘rainy-day’ account is linked to an illiquid retirement account. This combined account structure will be delivered in the workplace, with contributions deducted automatically through pay and managed to create an optimal level of liquid savings, while also maximising long-term savings.

Project partners

Money Advice Service logo

The Money Advice Service helps people manage their money. They do this directly through their own free and impartial advice service. They also work in partnership with other organisations to help people make the most of their money. They are an independent service, set up by government.

Latest research

Liquidity and sidecar savings discussion paper (PDF)
Liquidity and retirement savings: what’s the right balance (PDF).