What is a Livret A?
The Livret A is a state-regulated, tax-free savings account. The French government sets the interest rate and deposit ceiling and uses the funds deposited in the Livret A to fund social housing and urban renewal.
The current Livret A interest rate is 3% and you cannot deposit more than €22,950.
Interest is calculated twice a month - on the 1st and 16th - and added to the account on December 31 each year.
This means that despite the €22,950 deposit limit, the amount in the account can exceed this sum.
Read More: The tax-free French savings account open to all with 3% interest rate
Why are Livret A savings so popular?
Le Cercle de l’Epargne, a savings think tank, said €6.27 billion had been deposited in Livret A accounts last month - a record for February.
Philippe Crevel, director of the think tank, told RTL radio that eight-in-10 French people had a Livret A.
But why, given the interest rate is 3% and inflation is currently running at 6% in France?
The two main reasons are accessibility and tax-free savings.
Money put in a Livret A can be accessed at any moment, with the minimum withdrawal and deposit rate set at €10 (or €1.50 for those with a Livret A at the Banque Postale, the post office’s bank). Accounts offering higher interest rates may require savers to lock their money away for longer periods.
Secondly, as mentioned previously, money placed in Livret A accounts is exempt from tax and social charges, which is not the case for all savings accounts.
What are the benefits?
The tax advantages are a significant benefit. The Livret A’s interest rates also change to reflect the current inflation rate twice a year.
Livret A interest rates rose twice in 2022, from 0.5% to 1% in February and then from 1% to 2% in August. They increased again to 3% in February 2023.
Funds placed in Livret A accounts are also guaranteed by the state.
Anyone can open a Livret A in France, with no restrictions on age, nationality or even tax residency.
Read more: What February interest rises for regulated savings accounts in France?
What are the drawbacks?
The interest rate is currently only about half the rate of inflation in France, meaning funds kept in Livret A accounts are not keeping pace with it and are reducing in purchasing power.
You can also only have one Livret A per person and you cannot move your Livret A between banks. If you want to change to a Livret A with another bank you must first close your current Livret A and then open another and move the funds into it.
How do I open one?
Livret As can be opened in any bank operating in France, including online-only ones. Account holders and banks sign a contract which must mention that it is illegal to have more than one Livret A and how the Livret A works (deposits, withdrawals, interest calculations etc).
It is common for people to have a Livret A at the bank where they also hold a current account and it is easy to make transfers between them (eg. via online banking).
What are the alternatives?
The Livret de Développement Durable et Solidaire (LDDS) requires an initial deposit of €15. Deposits and withdrawals are free, but the amount deposited cannot exceed €12,000.
Beyond this deposit ceiling, the balance continues to earn interest. The interest is exempt from income tax and social charges.
Like the Livret A, you can only have one and the interest rate is set by the government at the same rate as the Livret A (currently 3%). They can be opened in any bank operating in France.
The Livret d'Epargne Populaire (LEP) is only available to people on modest incomes.
The interest rate is higher than a Livret A’s; currently, it is 6.1%.
The Livret Jeune is a tax-free savings account aimed at people aged 12 to 25 living in France.
Its rate of return is set by the banks, but must not fall below a set rate of 3%.
Individuals aged under 16 need permission from their legal representative (e.g. parent or registered guardian) to make withdrawals.
The maximum deposit amount is limited to €1,600. Only the owner of the account can make deposits into it.
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