Should we boycott life insurance and choose Livret A?

The Livret A rate increased by 2% on 1 August. It is apparently small in the face of inflation today that exceeds 6% … But it is still good news for savers, who may hesitate to invest their money in a fund in euros whose average return comes of 1.30% in 2021. he, yes or no, boycott life insurance for the sake of the famous rule book?

As of Monday August 1, the rate on your Livret A has doubled to 2%, net of all taxes! A return, admittedly below the rate of inflation, but it will certainly make you hesitate to continue investing your money in the euro fund of your life insurance. So the euro funds or savings account?

1 – How much do you earn?

Like all French people who invest their money in a savings product, the main driver of this choice is performance. On the one hand, 2% of your Livret A or other LDDS and, generally, 1.30% (in 2021) of your guaranteed capital fund with your life insurance contract, the calculation is made easy! However, for the year 2022, the difference is not so clear.

The Livret A account earns you 2% interest from August 1, calculated every two weeks. However, it is useful to remember that between January 1 and February 1, the rate is 0.5% then 1% until August 1. Which is actually an annual rate… 1.375%.

Your euro fund will earn you an average of 1.3% interest per year. A rate net of management fees at which you must withdraw 17.2% social contribution.

By depositing 10,000 euros in your savings account at an average annual rate of 1.375%, you will receive 137.50 euros in interest. By putting this amount of funds in euros in your life insurance, you will receive 130 euros interest of which you will get 17.2% (ie 22.36 euros). You only have 107.64 euros left in your pocket.

SIMULATOR. Find out the real 2022 yield of your Livret A (spoiler: mostly negative)

If Livret A remains more interesting, the difference is not as significant as one might at first think. The key savings market rate is the Livret A rate. The increase in the rate of regulated passbookswhich will continue in 2023, can increase the return on life insurance. Do it slowly to reach 1.7% or even 1.9%. It’s not quite the same as Livret A but the gap will be narrowed, analyzes Cyril Blesson, partner at specialist firm PAIR Conseil.

Victory (narrow) for Livret A.

2 – How much money can you deposit?

As you know, Livret A ceiling 22950 euros and you can only open one. So you can only deposit a maximum of 22,950 euros, only the interest earned will be added from the moment the ceiling is reached.

In your life insurance contract, you can invest as much money as you want and in as many contracts as you want.

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The increase in the Livret A rate will increase the collection of regulated booklets, but it risks being disrupted by the ceilings, underlined Cyril Blesson.

Victory in life insurance.

3 – Where can you diversify risks and investments?

Euro funds generally only represent a portion of your life insurance investments. The latest figures from France Assureurs confirm this. While net inflows for euro funds decreased (-8.8 billion euros in the first six months of the year), those for unit-linked funds reached 20.9 billion. By way of comparison, Livret A accounts recorded net inflows of 16.5 billion euros in the first half of 2022.

Life insurance: will the return on your euro fund finally increase as interest rates rise?

The French, often pushed by insurance companies, take more risks to get higher returns. Investing in life insurance allows you to juggle easier in different units of account and on ensuring capital gains in the euro fund. It is difficult, under these conditions, to compare a passbook and life insurance, which is more complicated and allows you to take risks for a medium or long-term savings project.

Victory in life insurance.

4 – Where is your money the easiest to get?

Either in your Livret A or in the euro fund of your life insurance contract, you have the possibility to withdraw your money when you need it. But one difference remains. If for Livret A, you only need to make a simple transfer that comes within the time of your current account, for life insurance it is a pair of sleeves. You should ask your insurer to pay the amounts within a period from 2 to 10 days.

5 – Costs: which product is more expensive?

Opening, adding to, withdrawing or closing your Livret A account: all these operations are free. Regarding life insurance, this is not the case: membership, entry or payment fees, management fees, arbitration fees, pilot management increases, annuity fees… If these operations are more or less expensive depending on your insurer, it is easy to have access to them to be able to negotiate with them. To do this, see the summary table of costs, accessible on the sites of distributors since June 1.

Results… Why choose?

The increase in the rate of Livret A and other regulated booklets, although welcome, is not enough reason to boycott life insurance and especially the euro fund. Especially since the euro fund is just one support among others within a life insurance contract. Contract with different objectives: preparation for retirement, succession, medium-term savings… While Livret A remains a precautionary savings medium.

If both have certain advantages, it is best to combine them. And if you have the possibility to put up to 22,950 euros in a Livret A, this means that you do not need to return this money to your current account every week… your Livret A, but to continue feeding your life insurance (funds in euros or another medium) in parallel.

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