The Livret A rate goes to 2% on August 1st. This obviously remains low in the face of inflation now exceeding 6%… but it is still good news for savers. Who could hesitate to invest their money in a fund in euros whose average return reaches 1.30% in 2021. So should we, yes or no, boycott life insurance in favor of the famous booklet?
Since Monday August 1st, the rate of your Livret A has doubled to 2%, net of all taxes! A return, admittedly below the rate of inflation, but which will surely make you hesitate to continue investing your money in the euro fund of your life insurance. So funds in euros or savings account?
1 – How much does it earn you?
Like all French people who invest their money in a savings product, the primary driver of this choice is performance. With, on one side, 2% on your Livret A or other LDDS and, on average, 1.30% on your capital guaranteed fund of your life insurance contract, the calculation is quickly done! But, for the year 2022, the difference is not so obvious.
The Livret A savings account will earn you 2% interest from August 1, calculated every two weeks. However, it is useful to remember that between January 1 and February 1, the rate was 0.5% then 1% until August 1. Which is actually an annual rate… 1.375%.
Your fund in euros earns you an average of 1.3% interest over the year. A rate net of management fees from which you will however have to withdraw 17.2% social contributions.
By placing 10,000 euros in your savings account At an average annual rate of 1.375%, you will receive 137.50 euros in interest. By placing this sum in the fund in euros of your life insurance, you will receive 130 euros in interest from which you withdraw 17.2% (i.e. 22.36 euros). You will only have 107.64 euros left in your pocket.
SIMULATOR. Discover the real 2022 yield of your Livret A (spoiler: it is largely negative)
If the Livret A remains more interesting, the difference is not as significant as one might think at first. The key savings market rate is the Livret A rate. The increase in the rate of regulated passbookswhich will continue in 2023, will boost life insurance returns. It will be done little by little to reach 1.7% or even 1.9%. It will never be as much as the Livret A but the gap will be reduced, analyzes Cyril Blesson, partner at the specialist firm PAIR Conseil.
Victory (narrowly) for Livret A.
2 – How much money can you deposit?
As you know, Livret A is ceiling 22950 euros and you can only open one. You can therefore only place a maximum of 22,950 euros, only the interest generated will be added from the moment the ceiling is reached.
On your life insurance contract, you can invest as much money as you wish and on as many contracts as you wish.
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The increase in the Livret A rate will boost the collection of regulated booklets, but it risks being hampered by the ceilings, underlines Cyril Blesson.
Life insurance victory.
3 – Where can you diversify risks and investments?
The fund in euros very often represents only a part of your investments in life insurance. The latest figures from France Assureurs confirm this. While net inflows for funds in euros were down (-8.8 billion euros over the first six months of the year), those for unit-linked funds reached 20.9 billion. By way of comparison, Livret A accounts recorded net inflows of 16.5 billion euros during the first half of 2022.
Life insurance: will the return on your euro fund finally go up with the rise in interest rates?
The French, often pushed by insurance companies, take more and more risks to obtain higher returns. Investing in life insurance allows you to juggle easier on the various units of account and of securing capital gains on the euro fund. It is difficult, under these conditions, to compare a passbook and life insurance, which is more complex and allows you to take risks for a medium or long-term savings project.
Life insurance victory.
4 – Where is your money most accessible?
Whether on your Livret A or on the euro fund of your life insurance contract, you have the possibility of withdrawing your money as soon as you need it. But a difference remains. When for the Livret A, you only have to make a simple transfer which will arrive within the hour on your current account, for the life insurance it is another pair of sleeves. You will have to request your insurer who will then pay the sums within a period ranging from 2 to 10 days.
5 – Costs: which product is more expensive?
Opening, adding to, withdrawing or closing your Livret A account: all these operations are free. Regarding life insurance, this is not the case: membership, entry or payment fees, management fees, arbitration fees, increase for pilot management, annuity fees… If these operations are more or less expensive depending on your insurer, it is now easy to have access to them in order to be able to negotiate them. To do this, refer to the summary table of costs, accessible on the distributors’ sites since June 1st.
Result… Why choose?
The increase in the rate of Livret A and other regulated booklets, although welcome, is not a sufficient reason to boycott life insurance and in particular the fund in euros. Especially since the fund in euros is only one support among others within a life insurance contract. Contract which has various objectives: preparing for retirement, succession, medium-term savings… While the Livret A remains a precautionary savings medium.
If both have certain advantages, it is best to combine them. And if you have the possibility of placing up to 22,950 euros on a Livret A, it means that you do not need to repatriate this money to your current account every week… It would therefore be wise to keep part of this savings accessible on your Livret A, but to continue to feed your life insurance (funds in euros or another medium) in parallel.
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