Automating Short-Term Payroll Savings: Evidence from Two Large U.K. Experiments

By: Sarah Holmes Berk, James J. Choi, Jay Garg, John Beshears and David Laibson

Format:Print
| Language:English
| Pages:73

Abstract

Automatic enrollment is often used to increase retirement savings. What are the effects of using it (or, alternatively, requiring an active enrollment choice) to increase short-term savings? We evaluate two experiments in the U.K. at employers that enable workers to set up payroll contributions to fund short-term savings accounts. In the first experiment (N = 7,404), employees at two firms were randomly assigned opt-in, opt-out, or active choice enrollment into the short-term savings program. Nine months later, participation was 48 percentage points higher under automatic enrollment than opt-in enrollment, and average balances were £114 higher. In the second experiment (N = 3,605), after years of offering opt-in payroll contributions to fund a short-term savings account, the employer changed to opt-out enrollment for new hires only. In tenure month 18, participation in the short-term savings program was 48 percentage points higher under automatic enrollment, and average balances were £193 higher.

Keywords

Retirement Savings; Participation; Automatic Enrollment; Retirement; Human Resources

Citation

Berk, Sarah Holmes, James J. Choi, Jay Garg, John Beshears, and David Laibson. "Automating Short-Term Payroll Savings: Evidence from Two Large U.K. Experiments." NBER Working Paper Series, No. 32581, June 2024.