should we always prefer the Livret A to life insurance?

The Livret A rate did not increase on August 1, it will remain at 3% for the next 18 months. A decision which could, despite everything, encourage you to always favor regulated savings rather than the euro life insurance funds, which are often less profitable. Despite appearances, the choice is not so obvious. Here are 5 comparison elements to see more clearly.

With a rate of 3%, maintained until January 31, 2025, the Livret A is still popular with savers. Especially in comparison with the remuneration of life insurance funds in euros, the capital of which is guaranteed.

As a result, during the first half of 2023, net inflows from Livret A accounts, i.e. the difference between savings deposits and withdrawals, amounted to 25.84 billion euros. At the same time, outflows from euro funds amounted to 15.5 billion euros. So should we really continue to leave life insurance for Livret A today?

1- Performance

When comparing two savings products, we necessarily focus on their performance. You have one side 3% for the rate of your Livret A or the LDDS and on the other, an average remuneration of 1.91% in 2022 on the euro fund of your life insurance policy.

But the Livret A yields 3% interest, calculated fortnightly, since February 1. Between January 1 and January 31, the rate was 2%. Which is in reality an annual rate of 2023… 2.92%. therefore compare with the 1.91% interest in 2022 for the life insurance fund in euros. Please note: the return on the fund in euros is a rate net of management fees from which 17.2% of social security contributions must be deducted. A fund in euros in the average therefore yields just over 1.58% net… The Livret A account seems more interesting for the moment. Only the People’s Savings Account (LEP) offers a higher rate, 6%, but it is only reserved for some savers.

LEP 6%: these 9million French people who miss the windfall

But life insurance has not said its last word. According to several experts, the return on funds in euros could well come close to the rate of the Livret A. And it could approach the 2.5% 2.8% yield, or even reach 3% for the best deals. Insurers with a large profit sharing provision (PPB) that served the best rates in 2022, around 2.5%, will probably push up to 3%, recently confided Moneyvox, Gildas Robert, Senior partner Actuarial & Financial Services at Optimind.

Life insurance: will the 2023 return on your contract beat the new Livret A rate?

Furthermore, life insurance can enable you to generate more interest than that provided by your euro fund. condition of course, of diversify your investments through units of account. The fund in euros, which provides a 100% capital guarantee, very often represents only part of your life insurance investments.

The latest figures from France Assureurs stopped at the end of June confirm this. While savers shunned funds in euros, units of account, potentially more profitable but also more risky, recorded net inflows of 19.5 billion euros in the first half. The units of account, whose capital is not guaranteed, thus make it possible to invest in shares, bonds or even in real estate.

Livret A advantage if you do not take any risk

2- The payment ceiling

As you may know, payments on a Livret A are limited. The deposit limit is currently 22950 euros. A threshold which can then be supplemented by the interest generated. Thus, the authorized ceiling can be exceeded, but only thanks to capitalized interest.

Why does the Livret A ceiling not pass 30,000 euros while that of the LEP increases?

While on your life insurance contract, you can invest as much money as you want. You can even open several contracts.

life insurance benefit

3- The time limit for withdrawing your money

Whether on your Livret A or on the euro fund of your life insurance contract, you have the possibility of withdrawing your money as soon as you need it. But a difference remains. For Livret A, a simple transfer will arrive immediately if your current account is with the same establishment. For life insurance, the average delay is 3 days. The insurance code sets a maximum period of 2 months. Note that for a withdrawal on life insurance less than 8 years old, the tax advantage is less attractive.

Withdrawal from a life insurance contract: how soon will you receive your money?

Advantage Booklet A

4- Transmission

One of the big advantages of life insurance is that the contract amount is not part of the insured’s estate.

This contract therefore makes it possible to benefit from a reduced taxation on the transmission of financial assets during a death for payments made before age 70. It is therefore possible to transmit sums to a beneficiary without having to respect the hereditary reserve, that is to say the minimum part of an estate which necessarily goes to his descendants. This reserve is 50% when there is one child and 66% for two children.

The taxation of life insurance in the event of death

Life insurance also makes it possible to give money to a person with whom the insured does not necessarily have a relationship. Please note that heirs who feel wronged may raise the notion of manifestly exaggerated premiums to denounce this decision.

Conversely, sums deposited in a Livret A do they enter completely into the succession. The heirs will therefore have to pay inheritance tax.

life insurance benefit

5- Fees

Ct Livret A, it’s simple: zero fees. For life insurance, the analysis of costs is much more complex… For an investment in a fund in euros, the return is however announced to you. net of management fees: so you can compare performance without worrying too much about these fees.

On the other hand, pay attention to the fees on payment! If you have ever taken out your life insurance at a bank, they probably charge a fee each time you deposit money, which immediately causes you to lose 1 to 2 years – or even more – of earnings. Good news: online life insurance players do not charge fees on payment. But stay vigilant on this point.

Comparison of low cost life insurance offers

Advantage Booklet A

The balance sheet

The current rate of the Livret A and other regulated savings accounts is not a sufficient reason to boycott life insurance and in particular the fund in euros, which is only one support among others, alongside units of account.

If both products offer certain advantages, the best is to combine them. On the one hand, place precautionary savings in their Livret A savings account, comprising between 2 and 6 months of income, and available in case of need (birth, change of washing machine, car repair, etc.). And in parallel bet on life insurance, to obtain more return over the long term and finance larger projects (real estate for example) or prepare for your retirement or your estate.

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