The Covid-19 crisis has prompted savers to prefer liquid savings to life insurance. In 2020, Livret A inflows reached record levels: 26.4 billion euros were placed in this medium, compared with 12.64 billion euros in 2019. This is a record since 2012, according to Caisse des Dépôts.
The French prefer liquid savings
At the end of December, total outstandings on France's favorite investment stood at 326.5 billion euros, compared with 298.6 billion euros in 2019. Net Livret A inflows totaled 26.4 billion euros, the highest since 2012. Despite a very low interest rate of 0.5%, the Livret A continues to attract savings from the French. In these times of crisis, households, including the wealthiest, are looking for guaranteed capital.
The Livret de développement durable et solidaire (LDDS) also saw net inflows rise to 8.8 billion euros, while sight deposits swelled by around 75 billion. Its low interest rate has not deterred the French, and is set to remain at 0.5% until its next review in August 2021.
The decision by the French to favour liquid savings is linked to the containment measures, but also to a period of uncertainty which favours precautionary savings. Precautionary savings will only be relaxed if the epidemic subsides.
Life insurance struggling
The success of the Livret A and LDDS is set to continue in 2021, to the detriment of life insurance, which posted significant negative net inflows: -6.5 billion euros, compared with +21.9 billion euros in 2019.
There are several reasons for this spectacular outflow:
- low returns on euro funds,
- the absence of a capital guarantee,
- the fall in financial markets in March/April 2020
- and the arrival in force of the Retirement Savings Plan (PER).
Even so, at the end of November 2020, assets under management reached 1,785 billion euros, making life insurance the preferred investment of the French. Between January and November, unit-linked products grew strongly, accounting for 34% of all contributions, or over 35 billion euros, compared with 27% in 2019. It has to be said that insurers are urging their customers to diversify their savings between euro-denominated funds and unit-linked products, in order to benefit from higher returns that nevertheless come with greater risk-taking. Units of account are investments whose capital and interest are not guaranteed. They differ from euro funds, which guarantee both capital and interest.
As a result, the fluctuation in life insurance savings is generally to the benefit of the Livret A passbook, but not always with a view to earning a return. This phenomenon occurred in 2020 against the backdrop of the health crisis, which caused uncertainty and prompted holders of life insurance policies to transfer their funds to schemes deemed safer.