France offers a unique regulated savings system that allows citizens to invest substantial amounts with state guarantees, tax exemptions, and easy access. Key savings products include Livret A, LDDS, LEP, PEL, and CEL, each with distinct advantages in yield, deposit limits, and accessibility. While Livret A is widely accessible, LEP offers higher yields for low-income individuals, and PEL has the highest deposit ceiling. These savings options support public interest initiatives, ensuring funds contribute to social projects.
Understanding Regulated Savings in France
France stands out as a unique country where individuals can invest tens of thousands of euros with a robust state guarantee, full accessibility, and zero taxation. However, not all regulated savings products offer the same benefits. Here are some insights to help you select the best option based on your financial profile.
It’s easy to overlook, but France’s “French-style” regulated savings system allows citizens to save significant amounts of money with the added advantages of tax exemptions, complete capital security, and immediate access. Specifically, you can save up to 44,950 euros for a low or non-taxed individual by utilizing Livret A (currently yielding 2.5% net), LDDS (2.5%), and LEP (3.5%). By adding a PEL and a CEL to your savings strategy, you can exceed 120,000 euros.
But how do you choose among these various savings accounts? Which should you prioritize? We have examined the pros and cons of Livret A, Livret de développement durable et solidaire (LDDS), Livret d’épargne populaire (LEP), Livret Jeune, Plan Epargne Logement (PEL), and CEL (Compte Epargne logement) based on critical factors: yield, deposit ceiling, accessibility, availability, security, and intended use of funds.
Analyzing Savings Products: Key Criteria
Yield: LEP Takes the Lead
The first consideration when investing is potential earnings. The Livret A interest rate, set by the government, generally influences all regulated savings products, except for the PEL. As of February 1, the Livret A rate is 2.40%. This rate is net, meaning that regulated savings accounts benefit from a tax and social exemption.
When it comes to yields, the Livret d’épargne populaire stands out. Its interest rate, which is designed to align with inflation or the Livret A rate plus half a point (whichever is higher), is currently boosted to 3.5%—0.60 points above its expected rate.
This additional benefit for the LEP targets lower-income households, specifically those whose reference tax income (RFR) is under 22,419 euros for one family quotient share. This demographic includes over 19 million individuals, with around 7 million yet to open a LEP.
Deposit Ceiling: PEL Wins
Regulated savings products come with certain limitations. While this may be disappointing for savers, it is beneficial for public finances, as these exemptions cost the government over 2 billion euros in 2023.
Each savings account has a specific deposit ceiling that can only be exceeded through accrued interest. Over the years, these ceilings have been adjusted. For instance, Livret A’s ceiling has risen from 15,300 to 22,950 euros since 2012, while the LDDS ceiling was doubled from 6,000 to 12,000 euros. Recently, the LEP limit increased from 7,700 to 10,000 euros. The CEL remains capped at 15,300 euros, and the Livret Jeune has a limit of 1,600 euros.
In this aspect, the Plan Epargne Logement (PEL) is the most favorable, allowing investments up to 61,200 euros at a gross rate of 1.75% (1.225% net after flat tax). However, it requires a minimum annual contribution of 540 euros, whether paid monthly, quarterly, or semi-annually.
Accessibility: Livret A is the Most Accessible
The Livret A is the epitome of a universal bank account. Anyone residing in France, regardless of age, can open one (only one per person, as multiple accounts are not allowed), including individuals who are homeless through La Banque Postale. This account is also accessible to associations, condominium syndicates, and HLM organizations. Housing savings accounts (PEL and CEL) are nearly universally available to all individuals, including minors.
Other regulated savings products are more restrictive. For example, to open a LDDS, you must be a taxable individual, and minors attached to their parents’ tax households cannot access it. The Livret Jeune is exclusively for those aged 25 and under, while the LEP targets less affluent households.
Fund Availability: PEL is Less Flexible
The Livret A is favored for precautionary savings due to its significant advantage: deposited funds are not restricted and can be withdrawn at any time, even in amounts as small as 10 euros.
This advantage also applies to the LDDS, LEP, Livret Jeune, and CEL. However, the PEL, while allowing access to funds at any time, prohibits partial withdrawals, making it less suitable for those who may need to draw funds occasionally.
Capital Security: Livret A, LDDS, and LEP Offer Better Security
When you invest in a Livret A, LDDS, or LEP, you are fully assured of capital security. Your capital is guaranteed at 100% by the state, offering peace of mind to savers.
This level of security does not extend to PELs, CELs, and Livret Jeunes, which are protected by the Deposit Guarantee and Resolution Fund (FDGR). This protection covers up to 100,000 euros per client across all accounts held at a single bank.
Purpose of Savings: Financing Public Interest Initiatives
The essence of regulated savings lies in its purpose: to attract deposits that can be utilized by the government to support various public interest policies, such as social housing and urban development.