While the Livret A rate will fall on February 1, savers can legitimately wonder if it would be in their interest to favor the euro fund of their life insurance contract this year. The answer largely depends on your profile.
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– The yield on Livret A, down on February 1st, will fall further on August 1st.
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It was expected. The performance of Booklet Ajust like that of the Sustainable and Solidarity Development Booklet (LDDS), will fall on February 1, 2025. Frozen at 3% since August 1, 2023, its interest rate will plunge to 2.40% on this date. And the anticipated decline in inflation to around 1% by the summer could further penalize the remuneration of the savings account held by 57 million French people during its next revision, on August 1. It could then break below the 2% mark to land at 1.8%.
Hence a legitimate question: should you continue to rely on the Livret A or prefer the Euro fund, the guaranteed capital support of your life insurance contract? To answer this question, it is essential to review the main characteristics of these two savings products. Starting, therefore, with their remuneration. On the Livret A side, no suspense with an interest rate of 3% until January 31 then 2.40% from February 1 until July 31, 2025. yield expected to continue to erode on August 1, in the wake of inflation and the key rates of the European Central Bank (ECB). Over the whole year, the remuneration of Livret A could thus decline to 2.2% net on average.
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On the euro fund side, let us start by remembering that the return on guaranteed capital support for life insurance contracts is only known at the end of the past financial year. Insurers are therefore currently communicating returns for the year 2024. If the market average should settle at 2.50%, or even slightly above, some euro funds have done much better. Starting with Corum and its rate of 4.65% for Corum EuroLife or even Ampli mutual with remuneration of 3.75% for its Ampli Life Insurance contractor even Garance mutual insurance which paid a rate of 3.50% to its members.
A better interest rate for the best performing euro funds
At first glance, the euro funds of life insurance contracts have therefore done much better than the Livret A and its 3% in 2024. At least the best of them. A performance gap to put into perspective, however. Because if the return on the Livret A, a tax-exempt product like the LDDS or the Livret d’épargne populaire (LEP), is displayed “net of net”, this is not the case for the guaranteed capital support of the life insurance, the interest of which is at least subject to social security contributions of 17.2%. Thus, in 2024, a euro fund will have returned more than the Livret A to a saver if the return it provided exceeds 3.62% (3% / (1-0.172)). A performance achieved by the best contracts referenced in our classification of euro funds.
For the year 2025 which begins, certain euro funds, notably the most recent ones which are taking full advantage of the high bond rates of recent years, will also do better than Livret A. The market average remains around 2, 5%, or slightly more than 2% net of social security contributions. So, if the prospect of locking up your money in the long term does not frighten you, it is probably in your best interest to prefer life insurance in 2025… by obviously choosing a contract with a high-performance euro fund.
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On Livret A, your money is available at any time
Because, and it is essential to remember, on life insurance, taxation is limited to social security contributions of 17.2% after 8 years of contract holding. Before this deadline, you must pay the single flat-rate levy (PFU, flat tax) of 30% if you make a redemption. Hence the importance of keeping in mind that your capital is blocked on your life insurance during this period. Quite the opposite of Livret A, on which interest is completely exempt from tax and social security contributions, regardless of the date of your withdrawals.
The capital invested is therefore available at any time in your Livret A, without tax impact on your interests, unlike life insurance. Crucial information if you want to build up paid precautionary savings to be able to cover unforeseen expenses, for your health, your housing or your car for example. Especially since if a partial redemption on your life insurance contract is possible, your insurer legally has up to two months to pay you the funds. Of course, in reality, you will probably only have to wait a few days. But on a Livret A, the transfer to your current account will be made instantly.
A payment limit on the Livret A, not for life insurance
Performance or availability, the choice is yours. But one last element may force your hand. While payments on life insurance are not limited, you cannot exceed a ceiling set at 22,950 euros on the Livret A. If you have already reached it and your Sustainable and solidarity development booklet – the strict replica of the Livret A with a savings ceiling of 12,000 euros – is also on hold, so it is towards the euros fund of your life insurance that you should turn this year.
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