How Valuable Is Liquidity in Private Retirement Plans? Evidence From Increases in the Minimum Access Age
By Marc Chan, Cain Polidano, Lan Tong, Ha Vu, Roger Wilkins & Son Nguyen
A key design issue for private retirement plans is their liquidity before retirement age. We estimate the effects of an Australian policy reform that reduced private pension liquidity through increases in the minimum access age by birthdate. Using administrative data and a regression discontinuity design, we find small reductions in withdrawals, no employment response and reductions in contributions that point to early access being a valuable source of precautionary liquidity, especially for financially engaged individuals. Overall, as reductions in contributions largely offset the savings from reduced withdrawals, increases in the access age have little effect on net private pension savings.
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