Life insurance rates have rebounded strongly. For its part, the Livret A rate remains frozen at 3% for the entire year 2024. Do savers benefit from reducing their precautionary savings booklet in favor of life insurance in order to benefit from this increase in rates?
The 2023 life insurance rates have now all been revealed. Experts were counting on an average rate performance of 2.5%: this should be confirmed but some insurers have even done much better!
Many players offered excellent rates when certain players, such as savings associations, announced less good performances for the year 2023. Afer and Gaipare respectively offer yields 2.22% and 2.30% while the banks double their mouths with a rate 2.85% for the SG and mrs 3% For BNP Paribas. And this, even before any bonus based on the shares of units of account (UA) or the amounts paid. For their part, mutual insurers remain constant and find themselves in the leading pack, even exceeding the Livret A rate as for the Mutualist France. It thus achieves 3.70% net of management fees, a return which increases to 3.10% after deduction of social security contributions of 17.2%.
The Livret A saw its rate increase from 2 to 3% on February 1 2023 and it will remain frozen until January 31, 2025. The announcement of its 3% yield hit the mark and enabled record collections on this savings account, which is completely tax-exempt.
The increase in the ceiling of the popular savings account (LEP) 10,000 euros last fall and the change in the rate 6% in August changed this trend in the second half. Eligible households prefer to place their savings in this better-paid and equally tax-exempt savings account.
For those who have put their LEP at the ceiling or those who do not benefit from it, the Livret A remains the good option for precautionary savings. Knowing that inflation should slow down in 2024 to reach 2.5% in the second half of the year and thus make the real yield of the Livret A positive again.
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Short term investment? Plutt Booklet A
If you need to move the money in your current account but keep it close at hand (with a click to be precise) in the event of a hard hit, the Livret A is an ideal solution. No taxes applied and without any risk for your savings. And with its payment limit of 22,950 euros, it is suitable for many savers. Indeed, at the end of 2022, the average outstanding amount of a Livret A was 6,351 euros. At the same time, 9.6% of Livret A holders were at the ceiling. At the other end of the scale, 34% of savers with a Livret A account held less than 150 euros.
If there is no payment ceiling for life insurance in principle, it is, remember, subject to taxation in the event of withdrawal. But if the contract is more than 8 years old, the saver benefits from a annual tax deduction of 4600 euros for a single person (or 92,000 for a couple subject to joint taxation). So, it is always possible to get your money back without paying tax. As for the time it takes to transfer funds, it will take an average of 2 to 3 working days.
However, it should be kept in mind that certain contracts still impose a payment ceiling but only on the fund in euroswhose capital is guaranteed.
Long term investment? Rather life insurance
If the objective is to capitalize in the long term for your retirement and prepare your estate, life insurance remains the best option. In fact, this investment allows you to benefit from a reduced tax on transfer of financial assets upon death for payments made before age 70. It is therefore possible to transmit sums to a beneficiary without having to respect the hereditary reserve and even to give money to an unrelated person.
Conversely, the sums deposited in a Livret A or any other regulated savings account enter completely into the estate. The heirs will therefore necessarily have to pay inheritance tax.
The products have very different characteristics in terms of liquidity, investment duration and also tax. The choice between Livret A and life insurance will depend on the age of the savers, their projects, the need or not to have instant access to their funds and their assets, explains Cyril Blesson, partner at the Pair Conseil firm. .
In 2023, new life insurance contracts will emerge offering exceptional returns after a few weeks or months of existence. Placement-direct.fr announced at the beginning of January that its very recent single-support contract (and therefore exclusively in euro funds) launched at the beginning of November, displays a performance net of management fees which amounts 4.10%. Corum, for its part, revealed a performance of 4.45% net of management fees on Corum EuroLifelaunched last summer.
But these performances only apply to the last weeks or a few months of the past year and cannot reasonably be compared to the other rates announced.
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Choosing between risk taking and security
As mentioned above, the Livret A allows you to access your funds immediately and not take any risk. Life insurance, for its part, is a much more versatile investment. Multi-support contracts allow you to secure part of your savings in the euro fund but also to diversify your investments to obtain better returns in the medium and long term thanks to the UC, which still carries a risk of capital loss.
In view of 2023 performance, holding a more or less significant share of units of account within your life insurance contract allows you to benefit from subsidized rates, higher than the Livret A rate. This is for example the case for contracts LCL Life (up to 3.60%), Squoia of SG bank (up to 3.73%), Cashmere 2 Series 2 of La Banque Postale (up to 3.80%) or even Multiple placements 2 of BNP Paribas (up to 5%). These subsidized rates may also be subject to payment constraints.
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What yield for 2024?
The year 2023 was difficult for euro funds. Life insurance funds in euros recorded a collection of 25.4 billion euros, according to France Assureurs. Investments in units of account (UC) are still in good shape, driven by insurers. And in exchange for subsidized rates, savers agree to take more or less high risks.
We are planning a resumption of life insurance in euros in 2024, which will certainly erode life insurance market shares in UC. Savers should actually look at life insurance more favorably due to the rise in rates. The withdrawal will certainly be less marked than in 2023. This will reverse the trend of last year but it will not turn the tables, analyzes Cyril Blesson, before adding, we are still in an economic environment where we are going have a deterioration in the labor market, according to the latest INSEE surveys, and therefore, savers should maintain precautionary and promote liquid savings, which remains adequately remunerated. Clearly, Livret A retains a certain advantage.
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The life insurance policeman wants the reserves to be redistributed
But life insurance is far from having said its last word. The insurers’ watchdog, the ACPR, has also specified in its work program that it will study changes in the remuneration paid for 2023 in life insurance, in particular the progressive redistribution of the provision for profit sharing (PPB) constituted in recent years in order to maintain attractive remuneration for savers. At the end of 2022, the PPB represented 5.4% of the 1,165 billion euros in outstanding life insurance contracts, according to the ACPR.
For 2024, the return on euro funds from life insurance contracts should increase in 2024, making this product more competitive, says economist Philippe Crevel. The average remuneration should therefore approach a little closer to 3%.
The balance sheet
The current rate of Livret A and other regulated savings accounts is not a sufficient reason to abandon life insurance. Both products offer clear benefits. It is therefore best to combine them. Place on one hand on its A booklet precautionary savings, comprised between 2 and 6 months of incomeand available if needed (birth, changing washing machine, car repair, etc.).
And in parallel rely on life insurance to obtain more long-term returns and finance larger projects, such as real estate, or prepare for retirement or inheritance.