The Popular Savings Account (LEP) is facing declining popularity and lower projected funds in 2024, with a drop in interest rates from 6.1% to 4% and a further expected decrease to 3%. Despite this, the LEP remains a competitive option compared to other savings accounts due to its guaranteed higher interest rates. Eligible individuals, based on income thresholds, should consider the LEP as it may still yield positive returns, particularly with anticipated lower inflation rates.
Future Prospects for the Popular Savings Account (LEP)
Despite its bright future, the Popular Savings Account (LEP) is currently experiencing a decrease in popularity. In 2024, the total funds collected through LEP are projected to be significantly lower than in 2023. In the first 11 months of last year, the account amassed 6.26 billion euros, a stark contrast to the 18.67 billion euros collected in the same timeframe a year prior. This drop can be attributed to various factors, including the fact that nearly half of the LEP accounts have reached or exceeded their deposit limit, thereby restricting further contributions from account holders. Additionally, the appeal of the LEP is waning as its interest rate continues to decline. After reaching a peak of 6.1% at the start of 2023, the rate has now reduced to 4% and is anticipated to decrease further to 3% on February 1st.
Why You Should Still Consider the LEP
Despite the falling interest rates, eligible savers should not overlook the benefits of the LEP. This savings account remains a competitive option compared to other regulated savings accounts. A decree issued on January 27, 2021, mandates that the LEP’s interest rate must always be at least 0.5% higher than that of the Livret A, ensuring that it remains a more attractive choice. Even with a rate of 3%, the LEP will still provide better returns than other safe savings alternatives. For instance, the yield on the sustainable and solidarity development savings account (LDDS) and the Livret A is expected to be 2.5% starting February 1st, while the housing savings plan (PEL) offers a mere 1.75%, and the housing savings account (CEL) provides 2%.
Moreover, the real yield for the LEP is likely to stay positive in 2025 as inflation rates decline. When evaluating the actual yield of any savings option, it’s essential to consider the inflation rate. According to the Bank of France, an average price increase of 1.5% is forecasted for 2025, meaning that even with a reduced rate of 3%, the LEP will maintain a real yield, after accounting for inflation, of 1.5% until its next rate revision on August 1st.
Lastly, you may be eligible for the LEP without even realizing it! According to recent data from the Bank of France, 11.7 million French citizens held an LEP as of last September, which is an increase of 6.9 million since 2021, yet still falls short of the 18 million eligible individuals overall. As a reference, in 2024, a single individual needed a reference tax income of under 22,419 euros—roughly less than 1,870 euros monthly—to qualify for an LEP. This threshold is expected to be adjusted slightly upwards soon to reflect inflation. If you’re uncertain about your eligibility, feel free to reach out to your bank for assistance in confirming your status.