Pandemic boosted French savings: Options beyond bank current account
People in France have saved over €150billion during the health crisis. We explain the different options for savings accounts if you choose to put aside some extra cash
An expert advised people to keep two months of income in their current account and invest the rest Pic: Krakenimages.com / Shutterstock
For the first time there is more than €500billion being kept in French current accounts, linked to less travel and socialising during the health crisis.
The amount is up by €170billion compared to levels in 2017 and is being put down to the fact people have had less chance to go out shopping, to restaurants and cafes or to take holidays.
However experts say that it does not make financial sense to keep so much in current accounts, which give no interest.
According to Philippe Crevel, of savings study body le Cercle de l’épargne, it is ideal to leave two months’-worth of your salary in your current account and place the rest in short or long-term savings plans or consider alternatives such as property investments or starting a business.
While current accounts come with certain freedoms such as easy access to funds, the same is true of some of the popular tax-free accounts which give interest.
We look at some of the major kinds of savings accounts available in France.
Livret A accounts are considered the basic, standard savings accounts in France.
They are offered by all banks and are considered very safe. They allow money to be withdrawn at any time, but offer low interest rates, set twice a year by the state based on inflation rates, which are currently 0.5%.
You can deposit and withdraw freely (though not in amounts less than €10) and it is impossible to become overdrawn.
A deposit cannot result in total savings above €22,950 though once this is reached the account continues to accrue tax and social charges-free interest.
Crédit Mutuel offers a version known as the Livret Bleu.
Other forms of livret
There are a number of different forms of French livret (savings account) and they can all be held concurrently, so as to maximise tax-free savings, however you cannot have more than one of each. They include:
LDDS (Livret de Développement Durable et Solidaire): This plan, which translates as ‘sustainable and socially-responsible development account’, currently has the same rate as the Livret A and the ceiling for deposits is €12,000.
LEP (Livret d'Epargne Populaire): Limited to those with ‘modest’ incomes, below a certain level (based on your last tax return), this has a 1% rate currently and a ceiling of €7,700.
For more about these and other accounts such as the Livret Jeune, Plan d’épargne retraite populaire (Perp), and the CEL (Compte Epargne Logement) see this previous article.
Despite the name, meaning ‘life assurance’, assurance vie products are one of the most popular ways to save in France and are not limited to providing for loved-ones in the event of your death.
As with the livret accounts, high street banks offer these investment plans, along with other intermediaries such as certain financial advisers.
Their rates are generally superior to the savings livrets, but they are not social-charges free and you need to keep the account for eight years before benefiting from certain tax advantages on withdrawals (income tax is not taken off if no money is taken out).
They can be used to save money for designated beneficiaries in case of death, but can also be used as a way of simply investing and growing capital or used as a retirement fund.
Funds can either be invested in euros for greater security, or in unities de compte (invested in stocks and shares) which may fluctuate more but could be more profitable over time.
Unlike other savings accounts, such as the Livret A, it is possible to open multiple assurance vie accounts at the same time, and there is no ceiling for how much can be invested
Can second home-owners open a savings account, or do you have to be a resident?
This depends on the account and the main purposes for its opening.
In most cases, you will need a proof of address to open a French bank account and the Livret de Développement Durable (LDD), Livret d’Epargne Populaire (LEP), and Livret Jeune are only available to residents.
You do not have to prove full-time residency to hold other forms of savings account such as a Livret A or the Crédit Mutuel’s Livret Bleu.
Note however that if you live outside France many countries will not recognise these accounts as being tax-free, in which case you need to declare the interest accrued and may need to pay extra tax in your home country if you hold savings in these in France.