Team Livret A or team life insurance? The choice between these two products depends on several factors, including your investment objective. But if we only talk about the interest generated, the winner is not who you think.
The Livret A and life insurance match still rages. Should we favor the Livret A accessible and available by simple transfer in one click or prefer long-term savings such as life insurance? There is no ready answer. Everything depends on your objective: precautionary savings, transmission, financing of a long-term project, etc. If your choice is purely motivated by financial interests, the prize goes to long-term life insurance. Although in the short term, Livret A still has a head start. Explanations.
With a 3% freeze rate, should you empty your Livret A to bet everything on life insurance in 2024?
long term, life insurance
Life insurance has experienced several years of scarcity. And for good reason, at the end of 2021, the average rate of euro life insurance funds fell to 1.28% before rising to 1.90% and 2.6% in 2023, before social security contributions.
These are the average rates of return on funds in euros calculated each year by the ACPR.
MoneyVox Great increases which do not equal those of Livret A. And it was not won: in 2008, the rate of this livret reached 4% and gradually fell to stagnate0.75% between August 1, 2015 and January 31, 2020 . On February 1, 2020, it continued to fall and reached its legal floor of 0.5% (which will remain the same until January 31, 2022). It is from this moment, with very high inflation, that the Livret A rate gradually rises to 1%, 2% and finally3% since February 1, 2023
. This 3% rate is frozen until January 31, 2025. According to the latest figures from the Prudential Control and Resolution Authority (ACPR) based on the average duration of holding a life insurance contract, i.e. 8 years, the average Livret A rate is 1.04% and that of funds in euros1.76%
. Concretely with a single payment of 1000 euros on your Livret A since January 1, 2016, you would have collected 87.28 euros interest at the end of 2023. By saving the same amount on a life insurance contract and with an average rate of 1.76%, you would have benefited from 122.72 euros
capital gains net of all social security contributions (and taxes since the contract is 8 years old). As you will have understood, long-term life insurance pays a little more than the Livret A.
on Altaprofits Life
Past performance is no guarantee of future performance
And it’s not over. The Livret A rate, which serves as a reference rate for savers, has been capped at 3% since January 2023; the decline in inflation, which started in 2023 and should bring it down to 2% by 2025 according to forecasts from the Banque de France, should also support the real return on life insurance, specified the ACPR in a report published this Tuesday March 19. Because if inflation falls, the Livret A rate, the calculation method of which integrates price variations, should also fall. As for life insurance, several experts are counting on an average rate close to 3% in 2024.
Moreover, certain insurers, the image of Garance and La France Mutualiste, have provided very good returns on their funds in euros since this year (respectively 3.50% and 3.70%). If the trend continues, euro fund rates should therefore continue to rise for the year 2024, or even in 2025.
Life insurance rates: the new top 5 euro funds
short term, the Livret A is the big winner If, on the other hand, the saver does not thinkonly short term over one year or less , Booklet A wins the round. Over the entire year 2024, by investing 1000 euros, the saver will generate 30 euros of capital gains on Booklet A3%, net of tax . On a life insurance contract, if we base ourselves on the average rate for 2023 of 2.6%, the saver would only benefit from 21.53 euros
interest, once the 17.2% social security contributions have been deducted.
Even if the average rate of euro funds reached 3% in 2024, this net rate would be lower than that of the Livret A due to taxation. However, the saver can always boost the return on his life insurance contract by investing in units of account (UC), investments that are potentially more profitable but riskier than the euro fund. Furthermore, it is possible to invest much more money on life insurance than on a Livret A capped at 22,950 euros of payment or even on the Livret de Développement Durable et Solidaire (LDDS) which is limited to 12,000 euros.
Finally, in terms of transmission, the advantage goes to life insurance. The capital transmitted in this way does not enter into the inheritance, unlike the sums held in the Livret A.