Savings for retirement under liquidity constraints: A note

Pension systems often entail some compulsory saving over which individuals have some degree of choice in terms of the pension plan in which to invest. We analyse whether the choice between alternative plans is affected by the presence of liquidity constraints during working life and we prove that the analytical conditions that determine the choice between different plans are the same in the constrained and unconstrained case.

► We explore the role of liquidity constraints on decisions regarding pension plans. ► We find that liquidity constraints do not affect the pension plans chosen. ► We prove that binding constraints strictly imply that the choice remains the same.