Livret A savings rate cut to 1.75%

Minister and bank agree to lower reduction than normal to protect people’s spending power

15 January 2013

SAVERS will see the interest rate on their “favourite” savings scheme, the Livret A, fall from 2.25% to 1.75% under an agreement between the government and the Banque de France.

The new rate will apply from February 1. The ceiling on savers’ accounts was raised to €22,950 on January 1 and anyone with this maximum will see their savings increase €401.62 at the new interest rate.

Economy Minister Pierre Moscovici confirmed the new rate in an interview on RTL.

The interest rate is usually tied to inflation – which was 1.2% in 2012 - and was calculated to fall from 2.25% to 1.5% under the usual formula, but he said that he had reached an agreement with the bank slow the fall to just 0.5%.

He said they had "agreed on the fact that people are still worried over their spending power" and given a “little boost” so that the savings rate was just ahead of inflation.

Despite the cut the Livret A is still attractive as a way of saving, because its interest is not taxed. Although some accounts offered higher rates they were less attractive once tax and social charges were taken into account.

Le Monde highlighted an RCI Banque account offering 5.5% for four months, but said that after this period the rate fell to 2.3% so that, after tax, this would mean a real 1.61% for anyone taxed at 14% and 1.26% for those taxed at 30%.
Photo: Unclesam - Fotolia.com

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