everything you need to know
Finally, some good news for savers: Banque de France governor François Villeroy de Galhau announced this Friday the new rate for Livret A, which will drop from 2% to 3%. Economy and Finance Minister Bruno Le Maire has just approved a “significant” increase proposal. 13 hours de France 2. All your questions are answered here.
Which savings products are affected by the new tariff?
The wage rate of Book A is revised twice a year, on February 1 and August 1. To calculate it, the Banque de France takes into account the average of short-term monetary interest rates and the average of inflation over the last six months. An increase in the A rating of the passbook automatically leads to an increase in the rates of the sustainable and solidarity-based development passbook (LDDS), the youth passbook and, consequently, the popular savings passbook (LEP).
What are the differences between all these booklets?
More than 55 million French people have an A passbook. “This is the first savings book created in France in 1818,” explains Philippe Crevel, director of the Savings Department. According to this economist, who is a specialist in macroeconomic issues, this savings product has the advantage of being “guaranteed by the State, exempt from all taxes and having an upper limit of 22,950 euros”. Besides, he adds, “you can come in and out as you please.”
The LDDS “has the same features as the A-book, only limited to 12,000 euros,” deciphers Philippe Crevel. It was created at a time when only a few banks could offer a livret A to their customers. As for the youth booklet, with an outstanding amount of no more than 1,600 euros, it is intended for 12-25-year-olds. His salary rate is freely determined by the banks, “but it cannot fall below the A livre”, the economist continues.
About 500 billion euros invested by the French in livret A and LDDS are used to finance social housing, the social and solidarity economy or even energy savings in housing. In theory, the Livret A rate should have fallen to 3.3% on February 1, but the Banque de France estimated that “a rate that is too high would be very unfavorable” for these sectors. Therefore, he proposed to Bruno Le Maire to use the exception provided by the decree of January 27, 2021.
What does this mean in terms of earnings?
From just 0.5% a year ago, the Livret A rate rose to 1% on February 1, 2022, then to 2% on August 1, and finally to 3% on February 1, 2023 reached “This is the level we have not seen since 2009,” emphasizes Philippe Crevel. According to the expert, this growth is “unprecedented even in a short period of time”. A move clearly explained by inflation.
How much will it bring to the savers? According to Philippe Crevel, knowing that “the average outstanding amount of a livret A is about €5,800”, the 3% rate would bring the French an average of €174 (versus €116 at the 2% rate). a year. full, i.e. an additional 58 euros. The exchange rate is still required to remain unchanged on August 1, 2023. A fully charged Livret A will earn him around €688.50 in interest (compared to €459 at 2%) or almost €230 extra.
Is Book A Really Profitable?
However, book A (just like LDDS and junior book) is not really profitable: “If we take inflation into account, the real return of book A is negative”, confirms Philippe Crevel. Thus, in 2022, the increase in consumer prices was on average 5.2%, that is, more than the livret A ratio. In summary, “we lost money, but less than we put in our current account or in other investments,” the director of the Cercle de l’épargne points out.
LEP, the best solution
The popular savings account (LEP) rate will also benefit from a revaluation on February 1, as it will rise from 4.6% to 6.1%. A year ago, it was only 1%. This significant increase is explained by the fact that the LEP rate is based on the inflation rate (if the latter is higher than Livret A), which makes the savings product very profitable.
The ceiling of the LEP, which is also exempt from income tax and social insurance contributions, is only 7,700 euros. In addition, it is reserved for people with modest incomes. To be eligible in 2023, a saver must have a reference tax income below a certain amount (€21,393 for a family share, €32,818 for two shares, €55,668 for four shares, etc.).
According to the Banque de France, 18 million French people qualify, but only 8.5 million LEPs have been opened at the end of 2021. It should be said that low-income households do not always have the opportunity to save.
Is Book A Better Than Life Insurance?
The more Livret A’s exchange rate is revalued, the more interesting this investment becomes. But is it as good as life insurance? For Philippe Crevel, “the rates of return of the two products are similar”. In 2022, “Livret A had a rate of return of 1.37% as its rate of return increased from 0.5 to 1 and then to 2%,” while life insurance was “around 1.8-2% overall and was 1.4%” after tax”, the economist develops. However, the latter reminds that life insurance may be superior to Book A in other aspects (no ceilings, transfer of assets, etc.).