SAVINGS – Make your choice. It was not worth much anymore, but from this Saturday, February 1, Booklet A will bring you even less. This Saturday, the rate of pay for the little red booklet will drop from 0.75% to 0.50%, as planned by the floor of its new calculation formula announced by Bruno Le Maire. Already at its lowest historic level, this rate is still falling, much lower than inflation, which was 1.1% on average in 2019.
The flagship savings product, the 202-year-old Livret A, is now owned by 55 million French people and is used to finance social housing. The saver can deposit or withdraw his money at any time, while seeing his deposits a little remunerated and his profits not taxed. The Sustainable and Solidarity Development Booklet (LDDS), which also now goes from 0.75% to 0.50%, works in a similar way.
Faced with this low rate of remuneration, holders of a Livret A may be tempted to move their agent to a product that is slightly more advantageous in terms of yield. The HuffPost asked Arnaud Sylvain, independent financial advisor in Nantes, to find out the best alternatives.
Choosing between yield, liquidity and security
Before wanting to completely turn your back on the Livret A, it is necessary to remember that the famous criticized fall in its rate has, in spite of everything, not a great impact on your savings. Indeed, the already very low rate yielded very little and this adjustment is minimal.
For example: the Livret A limit is limited to 22,950 euros. A person who reached this ceiling received, before the drop, 172 euros in yield per year. After the drop to 0.50%, it will touch 114 euros, a difference of 57 euros. For a person with a 5000 EUR savings account, he received 37.50 euros and now, he will receive 25 euros per year, a loss of 12.50 euros.
“You have to understand that the Livret A is a precautionary savings, to safely keep a certain amount of relief in which one can draw at any time. If you want to make your money grow, you have to choose another financial product, “recalls Arnaud Sylvain. And the choice is not always easy since we have to determine what is our priority:
– Earn interest on your investments
– Being able to withdraw your money when you want
– Keep your money safe, without risk taking
This knowing that, generally, what is without risk generates little return and vice versa. Once this priority is set, you can more easily decide where to put your money:
In an ELP (before February 2015)
The ELPs are the closest to Livret A in terms of security, while offering a better return with a rate of 2.07% net. Its ceiling is 61. 200 euros and you have to pay at least 540 euros per year to keep it open.
However, this rate only concerns ELPs opened before February 2015, as the current ones only offer a gross rate of 1%. Those opened from January 1, 2018 are subject to Flat Tax and therefore have a lower yield.
In terms of liquidity, however, the conditions are much less flexible: any withdrawal leads to the closure of the ELP.
In a popular savings book
LEP is a secure investment, guaranteed by the State and offers a return of 1% as of this February 1 (1.25% before this date). It is therefore closer to the rate of inflation. Its ceiling is lower than a Livret A, 7,700 euros.
However, not everyone is eligible for this investment: it is capped by income. If you earn too much, you will not be able to open one.
Advantage if you are eligible: it is completely liquid, can be drawn at any time.
In the euro fund of life insurance
This investment seems the most attractive at the moment in terms of yield / liquidity, even if it is a little more risky than the options mentioned above. On average, the rate of return on the life insurance fund in euros is 1.4% but can vary up to more than 3% because it depends on insurers.
However, its security is ensured by the insurance company and not the State. If the company goes bankrupt, your investment is in jeopardy.
In terms of liquidity, the waiting time to collect money varies between a few days and two weeks.
Arnaud Sylvain warns us, however, of changes that are gradually being made within insurance companies: “With the fall in interest rates, the latter are struggling to offer high yields. So, in an attempt to boost your savings, these companies very often now offer life insurance contracts with a share of funds in euros, almost without risk, and a share of stock account units, real estate. For the latter, the risks are higher ”.
“In these new life insurances, you put a certain percentage of your money in a euro fund and the rest in units of account. A part that you are not sure to find when you get your money. It’s risk-taking, but it’s also a chance for better returns, ”said the independent advisor.
Bank books
Surely you must have seen advertisements on TV or in the street for bank books at promotional rates “very advantageous and without risk”. On the one hand, without the promotional rates, a bank pass is not much more advantageous than a Pass A. The Pass B, for example, is used when the Pass A is full and works in the same way, except that it is taxed.
On the other hand, these famous attractive rates are generally only valid for a few months and are also gross of taxes, while the gains on these investments are taxed (17.2% of social security contributions minimum, 30% in all if you are taxable or, if you choose, taxed according to the progressive income tax schedule). The ceiling is variable.
“The miracle product does not exist. So if someone offers an investment with a high return without any risk, I would be wary, says Arnaud Sylvain. There is always a risk taking somewhere. You should also always inquire about liquidity. Not being able to get your money back for many years is a risk in itself ”.
Liquidity varies depending on the booklets.
In real estate via civil investment companies
Here, it is no longer a question of letting your money sleep peacefully, but of investing it. As a saver, you become an investor. And who says investment, says risks and possibility of big returns. Investing in a real estate investment company allows you to bet on stone without buying real estate. Returns fluctuate with rising house prices.
However, it is not easy to predict the curves of the property and to know if an investment is risky or not, which therefore makes it a risky investment. In addition, the investment costs are high.
As for liquidity, it is low and may even be nonexistent: “If nobody wants to buy your share, then you will not be able to get your money back,” warns Arnaud Sylvain.
In stock market shares
Finally, if you are not in a hurry, you can get rid of your money without too much trouble and you are not afraid of risk, you can put your money in stocks on the stock market (or in a stock savings plan PEA, for example). The return can be very high in the long run, depending on what you invest in.
However, investments are risky, large variations can occur, and your capital can be completely lost.
Liquidity is complex because you have to know when to withdraw your money, neither too early nor too late.
See also on The HuffPost: Before its “oversights”, Delevoye gave lessons in transparency
–
