In 2019, the vote of the Pacte law (Action Plan for Business Growth and Transformation) has notably enabled changes to employee savings and the operation of the PEA (Share Savings Plan) by creating the PER (Retirement Savings Plan). What you need to know about the changes to savings in 2020.
Livret A: 0.75% to 0.5
This is surely the change that will have the greatest impact on the French, who are very attached to this type of savings. In concrete terms, a new way of calculating the Livret A rate will come into effect from February 1, 2020. The Livret A rate will fall from 0.75% to 0.5%.
This new calculation formula determines the Livret A rate by taking into account the average inflation rate every 6 months and the average short-term interbank rate or EONIA (Euro OverNight Index Average). This EONIA rate provides an indication of the health of the banking market. The rate cannot fall below 0.5%.
LEP: from 1.25% to 1%.
The Livret d'épargne populaire savings account will also change. Although this type of savings account is more attractive than a Livret A, its rate will also fall, from 1.25% to 1%.
The LEP savings account is not subject to income tax or social security contributions. It is mainly intended for people on modest incomes. It is an attractive savings vehicle in that its interest rate is guaranteed. Only one LEP can be opened per person, with a limit of 2 per household. The ceiling is €7,700.
Creation of a eurocroissance fund
Early 2020 also sees the launch of the new-generation Eurocroissance fund, which can be accessed by any insurer wishing to set up this savings scheme.
This is a diversified fund, positioned between the unit-linked fund and the euro fund. In this way, you can count on a guarantee in euros while increasing your chances of earning a return through riskier investments.
This new fund came into effect on January 1, 2020. It offers a capital guarantee conditional on keeping your savings in the fund for 8 years.
Its main advantage is to offer savers more flexible financial management and better returns.
Setting up the PER
The Retirement Savings Plan is a product launched in October 2019 that comes in 3 forms:
- PER individual
- Group PER
- Mandatory company PER
The PER will replace the old retirement savings products. Its main advantage is that it offers genuine flexibility in savings management. In concrete terms, it offers freedom of choice when it comes to withdrawing funds, either as a lump sum or in the form of an annuity at retirement. It is also possible to obtain an early withdrawal to purchase a principal residence.
Older contracts such as Madelin and PERP will be replaced by PER. It is no longer possible to subscribe to either of these contracts. If you already have one, you can keep it or convert it to a PER.