The rise in the Livret A rate, which rose to 2% in August, may encourage you to prefer regulated savings to euro life insurance funds, which are often less profitable. Despite appearances, the choice is not so obvious. Here are 5 comparison items to see more clearly.
Thanks to a rate of 2%, which will continue to rise in 2023, the Livret A savings account is popular with savers. Especially in comparison with the remuneration of life insurance funds in euros, whose capital is guaranteed. As a result, the net inflow of savings accounts reached in September, i.e. the difference between savers’ deposits and withdrawals, almost up to 2.7 billion euros. This is more than ten times as much as in September 2021! As of now, the outstanding volume of Livret A and its false twin, the Livret de Développement Durable et Solidaire (LDDS), has exceeded the symbolic limit of 500 billion euros. Do we really have to give up life insurance for Livret A today?
When we compare two savings products, we necessarily focus on their performance. You have one side 2% for the rate for your Livret A or LDDS and on the other hand an average remuneration of 1.28% in 2021 on the Eurofund in your life insurance agreement.
But Livret A pays 2% interestfortnightly calculations only since 1 August. Between January 1 and February 1, the rate was 0.5% and then 1% until August 1. What does one actually do year rate 2022… 1.375%. Must therefore be compared with 1.28% interest in 2021 for the life insurance fund in euros. Please note: The return of the fund in euros is a rate net of management fees, from which 17.2% of social contributions must be deducted. A fund in euros on average therefore brings in just over 1% net… The Livret A account seems more interesting at the moment.
During the first nine months of the year, inflows exceeded 26 billion euros, compared to just under 20 billion euros in 2021. Thanks to two rate increases, Livret A is the investment of the year by simultaneously offering security, liquidity, zero taxation and an honorable return in the current context. With inflation above 5%, its real return is admittedly negative, but the latter is well above the average return on other savings products, explains economist Philippe Crevel. Only Folkets Sparekonto offers a higher rate, 4.6%, but it is only reserved for certain savers. The benefits of Livret A penalize long-term savings, as life insurance has recorded outflows in August. It should be noted that a further increase in the rate for Livret A is expected on 1 February 2023. Given the current price increase, the rate may exceed 3%.
But the life insurance has not said its last word. According to several experts, the remuneration is euro life funds may well come close to or even exceed the 2022 annuity A annual rate of 1.375%. The company Fakta & Tal estimates that the average rate for the profession could be between 1.60% and 2% in 2022. A forecast confirmed by Gildas Robert, director of actuarial and financial advice at the consulting firm Optimind. According to him, if insurers dig into their reserves, it could lead to an average interest rate paid of between 1.80% and 2%.
In addition, life insurance can allow you to generate more interest than your mutual fund. condition of course to diversify your investments. Eurofundwhich provide 100% capital guarantee, very often only represent a part of your life insurance investments.
The latest figures from France Assureurs stopped at the end of August confirm this. Although the net inflow of funds in euros has decreased by 12.4 billion euros since the beginning of the year, units of account, potentially more profitable but also riskier, recorded net inflows of 24.5 billion. The units of account, whose capital is not guaranteed, thus make it possible to invest in shares, bonds or even in real estate. This would make it possible in the medium term to reach an annual return according to Yves Conan, General Manager of Linxea closer to 4 or 4.5% than 2%.
Livret An advantage if you don’t take any risk
2- The payment ceiling
As you may know, payments on a Livret A are limited. The deposit limit is currently 22950 euros. A threshold which can then be supplemented with the generated interest. The permitted ceiling can thus be exceeded, but only thanks to capitalized interest.
Good euro funds will pay a good 2% this year. If your Livret A is at the ceiling, the extra container is life insurance, adds Yves Conan. You can actually invest as much money as you want on your life insurance contract. You can even open multiple contracts.
life insurance benefit
3- The time limit to withdraw your money
Whether it is on your Livret A or on the Eurofund in your life insurance contract, you have the option of withdrawing your money as soon as you need it. But one difference remains. For Livret A, a simple transfer will happen immediately if your current account is with the same institution. For life insurance, it will take one period from 2 to 10 days. The insurance code sets a maximum period of 2 months. Note that for a life insurance withdrawal less than 8 years old, the tax advantage is less attractive.
Advantage booklet A
The increase in the rate [du Livret A] may have made a draft. However, the two products are not comparable because they are not used to finance the same life projects for the French, declared Franck Le Vallois, CEO of France Assureurs during a press conference on September 29. In fact, one of the great advantages of life insurance is that the size of the contract does not not part of the insured’s estate.
This contract therefore makes it possible to benefit from reduced taxation on the transfer of financial assets on death for payments made before the age of 70. It is therefore possible to transfer amounts to a beneficiary without having to respect the inheritance, that is to say the minimum part of an estate which necessarily goes to his descendants. This reserve is 50% when there is one child and 66% for two children.
Life insurance also makes it possible to give money to a person with whom the insured does not necessarily have a relationship. Be careful, heirs who feel wronged may raise the notion grossly exaggerated premiums to terminate this decision.
Conversely, amounts deposited in a Livret A card book are fully included in the estate. The heirs must therefore pay inheritance tax.
life insurance benefit
Ct Livret A, it’s simple: zero fees. In the case of life insurance, the analysis of costs is much more complex… However, for an investment in a fund in euros, the return is announced to you minus management fees: you can therefore compare results without worrying too much about these costs..
On the other hand, pay attention to the fees when paying! If you’ve ever taken out your life insurance with a bank, they probably charge you a fee every time you deposit money, which immediately causes you to lose 1 to 2 years – or even more – of earnings. Good news: online life insurance players do not charge fees on payment. But pay attention to this point.
Advantage booklet A
The increase in the rate on Livret A and other regulated savings accounts is not a sufficient reason boycott life insurance and especially the fund in euros, which is only one support among others, next to units of account.
About both products have certain advantages, it is best to combine them. On the one hand, place preventive savings on their Livret A savings, which includes between 2 and 6 months’ income, and which is available in case of need (birth, changing washing machine, car repair, etc.). And at the same time bet on life insurance, to achieve more returns in the long term and finance larger projects (e.g. real estate) or prepare your pension or your property.
Life insurance: comparing offers with reduced costs