The Livret A is still the flagship savings product, despite a rate well below inflation. Its outstandings thus increased by over 4 billion euros in January, while its rate has never been so low: 0.5% since February and 0.75% between August 2015 and January 2020. The Livret A remains the preferred investment of the French, much to the regret of the government, which is trying to encourage households to diversify their savings.
Exceptional net new money in January
Livret A savings accounts collected 4.13 billion euros in January. While January is traditionally a good month for investing, when households deposit their end-of-year bonuses, we have to go back to 2013 to see inflows of over 4 billion euros. In January 2013, inflows reached 8.21 billion euros, in a very specific context, with payment ceilings having been revised upwards twice, at the end of 2012 and the beginning of 2013.
The January 2020 collection ranks as the fourth best since 2009. The Livret A recorded net inflows of 12.6 billion euros in 2019, compared with 10 billion in 2018. The Livret de Développement Durable et Solidaire (LDDS), the Livret A's little brother, recorded a more traditional net inflow of 410 million euros. In total, 411 billion euros were invested in these two passbooks combined at the end of December 2019.
Why is the Livret A still France's favorite investment?
55 million French people have a Livret A savings account, which is now 202 years old. Despite its historically low interest rate, the Livret A is still a star investment, not least because of its ease of use. You can deposit and withdraw money from your Livret A at any time, with no fees, no social security contributions and no capital gains tax.
However, it doesn't pay much and doesn't even cover the rate of inflation. If you deposit €100 at a rate of 0.5%, you'll earn 0.50 cents after one year. However, inflation is 1.5% over one year, meaning a loss of €1.50 on that €100, in terms of purchasing power.
The bonuses paid by companies at the height of the Gilets jaunes crisis didn't boost the economy: the French didn't consume more, but did save more.
The government would like to steer the French towards more productive investments and long-term savings, such as the Plan Épargne Retraite (PER), the Plan Épargne Action (PEA) or the Fonds eurocroissance, products that have been created or modified as part of the Pacte law. Despite political incentives, however, the French don't seem ready to change their habits.
According to the latest figures published by the Banque de France, 608 billion euros were placed on current accounts or held in cash at the end of September 2019, almost twice as much as ten years ago.