Livret A, LDDS, PEL: the proposals of the Court of Auditors to change the regulated savings

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Regulated savings (Livret A, LDDS, PEL, etc.) are the main vector of savings for French households. It is sometimes criticized for steering them away from riskier investments that are more profitable for financing the economy. To answer these criticisms, the Court of Auditors studied several ways to adapt the economic model of regulated savings without, however, irritating it.

Regulated savings represent a total outstanding of around €834 billion, or 14% of household financial savings. As such, it is the main storage vector for almost all of them. It is sometimes criticized for driving the French away from riskier investments that are more directly beneficial for financing the economy. To answer these criticisms, the Court of Auditors studied several ways to adapt the economic model of regulated savings without, however, irritating it.

Change booklet A and LDDS ceilings

In its annual report on regulated savings, the Banque de France shows that regulated savings are more concentrated in the richest and oldest categories of households. It is possible to combine a booklet A (capped at 22,500 euros) with the LDDS (capped at 12,000 euros), thus bringing the total ceiling to nearly 35,000 euros. A finding that raises questions about the tax exemption on interest.

The Court of Auditors considers that such a convergence of the amounts of the ceilings of the two booklets is not necessarily useful today, especially since it contributes to the increase of tax expenditure. So the organization considers many ways for improvement. The first consists of combining livret A and the LDDS by establishing a ceiling (at most the existing ceiling for livret A). The second is to keep the two booklets but to establish a total cap of 25,000 euros, which will limit the advantage given to the richest households.

These two paths are currently abandoned in the face of hesitation in the banking profession, which emphasizes the complex and expensive nature of such measures.

Taxation of passbooks

The tax expenditure in favor of various regulated savings products represents an amount of more than €800 million, including €131 million for livret A and more than €400 million for home savings. The Court of Auditors estimates that a household holding livret A and LDDS can be exempted up to €8 on average, an advantage that remains lower than the exemptions obtained by other savings products such as those not listed equity capital (around €1,000-2,000). per household), life insurance contracts (over €90 per household) or the PEA (€41).

The Court of Auditors considers that it is likely that the taxation of interest on regulated savings accounts has a negligible political cost in that it has a very limited or even no effect on relocating the savings concerned in favor of riskier products.

Give meaning to keeping home

Home savings contribute little to their initial purpose of financing housing real estate projects. It was diverted from his goal of home ownership to become a long-term savings product. The flow of new loans has fallen sharply in recent years, leading to almost zero production. The Court of Auditors considers that the PELs are a source of costs for public finances and for banks that are no longer justified for reasons of general interest.

At the end of December 2021, the Banque de France estimates that the average rate (weighted by outstandings) of PELs opened before 2011 is 4.51%, which guarantees an unparalleled return due to the level of risk incurred. Also, the Court recommended the reduction of the benefits provided to the beneficiaries of the PEL subscribed before 2011, due to the excessive costs imposed by this situation on the spending of the economy as a whole. He suggests several ways to do this.

The first would involve unilaterally changing the contracts of the establishments. However, the banking establishments do not seem to be in favor of this solution. Instead of using a unilateral approach that could risk having effects on their image and their commercial relationship, they can negotiate with their customers to release their PELs in return for a fee calculated according to the loss of the latter’s advantage . .

The second track would consist of preventing individuals from keeping their PELs by using tax leverage. However, such a move will target PELs that still escape tax deductions (such as PELs less than twelve years old opened before 2018) and its impact will be limited.

A third possibility would involve changing the legal framework of current contracts. However, this must be justified by a sufficient public interest factor. This may result in the possibility for banking establishments to change the terms of the old PEL while agreeing to contribute to the strengthening of the global economic model of regulated savings and to increase its use to priorities investment (ecological transition and energy…). It may also result in the application of a specific remuneration rate for expired PELs (ie those that have reached their contractual term but whose withdrawal was not requested by the depositor).

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