Published on 16 Feb 2023
Reading of 3 min.
Written by Stephanie Mosbach
Thematic : Placements financiers
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Life insurance vs the livret A: is there a match between these two savings products? Already revalued last summer, the passbook A rate has increased by 3% since February 1, 2023, exceeding the returns of certain euro funds present on life insurance contracts. Does the livret A then become a better investment than life insurance? Analysis and decryption.
Increase in booklet A: what impact on life insurance?
A small revolution is underway in the world oflife insurance. Competed with the booklet A, it raises its rates. The return of inflation and the sharp rise in rates by the European Central Bank (ECB) created an unprecedented situation for savers. That hadn’t happened for thirty years. For the first time in decades, insurers had to raise the rates of return on their euro funds. Especially since usually, by its form and its rates, the livret A is not a competitor of life insurance.
The trigger for this turnaround is therate increase of the booklet A. Recalculated every six months, the rate of the booklet A had already increased in August 2022. It had even doubled, going from 1% to 2%. Since February 1, its remuneration increased to 3%.
Is the livret A becoming a better investment than life insurance?
In reality, these two savings products do not follow the same objective. On the contrary, they turn out more complementary than competitors. Booklet A is a savings account. Life insurance is a financial investment. As a result no match on the horizon.
Booklet A is offered by all the banking institutions. To open such a savings account, all you have to do is make a minimum deposit of €10. The interest rate applies to the deposited capital and the interests are calculated twice a month. On the other hand, you cannot own only one.
An example with upgrading of fetish placement of the French, past 2 to 3% :
- if you have €5,000 on your livret A, until now it brought you €100 per year. With this increase, it now earns you €150.
Conversely, life insurance is a financial investment. It is generally made up of euro and unit-linked funds. Guaranteed, the euro funds allow to secure capital. While the units of account are subject to the financial market fluctuation. The value may increase or decrease. They serve to diversify savingsto take advantage of yield potential financial and real estate markets.
In conclusion, if the livret A and life insurance both constitute savings vehicles, they do not follow the same objectives. The first is rather indicated to place a precautionary savings (sums that may be needed immediately in the event of a financial emergency), when the second will be used to place a medium savings or long terme. On the other hand, thelife insurance keeps a few tricks up its sleeve, including uncapped payments. While those on booklet A are limited to €22,950.
What arbitrations with a passbook A rate of 3%?
The revaluation of the booklet A at 3% calls into question the usual arbitrations between short-term and long-term savings. Consequently, should we, in the coming months, fear waves of arbitrages from funds in euros to savings accounts? If this were the case, thearticle 49 of the Sapin II law of December 10, 2016would be likely to be triggered, giving the HCSF (High Council for Financial Stability) the possibility of stopping, for a time, withdrawals of funds from life insurance, in order toavoid massive capital outflows.
But he is all the same unlikely that this situation does not happen because for many observers, thelife insurance is a real bulwark once morest inflation.
Indeed, the Rising interest rates benefit life insurance and their regulators. Provided do not bet everything on euro funds ! The increase that we have known for a few months already so come reshuffle the cards and this is felt at the level of the collection global life insurance products.
“Net inflows turned positive once more at €1.4 billion in November 2022, its highest level for six months.”
The professional association France Assureurs
Savings envelope still as interesting in the current context, due to the different investment solutions and advantages it offers, it is therefore recommended to continue to save regularly through life insurance.
In summary
- Competing with the booklet A, life insurance increases its rates. An unprecedented situation. For the first time in 30 years, insurers are raising the rates of return on their funds in euros.
- On February 1, 2023, the remuneration of the Livret A account rose to 3%. A rate that calls into question the usual trade-offs between short-term and long-term savings.
- However, the two savings products remain complementary, with these changes not foreshadowing large transfers of capital from one to the other.
Find out more regarding the A booklet
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Stephanie Mosbach
Web writer, specialized in economics, finance and wealth management
Graduated from a school of journalism, passionate regarding web writing, voice (podcast) and new digital communication media, I work to decipher economic, heritage or real estate information as well as possible, so that it guide in your various personal or professional projects.
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