Tax-free booklets: status quo on rates in the face of rising inflation


It was expected, but as the saying goes, hope keeps alive: the rate of tax-exempt savings accounts in France did not change in August 2021, remaining at its historic lowest for the two main ones, the Livret A and the Sustainable and Solidarity Development Booklet. Bad news for savers because inflation is expected to rise sharply.

No increase in the rate of tax-exempt savings accounts

French savers can opt, for their savings, for three tax-free savings accounts: the Livret A, the best-known which has been for years “the favorite savings account of the French”, the Livret de Développement Durable et Solidaire (LDDS), its little cousin, and the Livret d’Épargne Populaire (LEP), accessible under conditions of resources.

All of these booklets have two advantages: money that can be mobilized immediately if necessary, often a simple transfer made via your online bank is sufficient, and tax exemption: interest is not subject to mandatory deductions.

Interest rates, for their part, are set by the state, as are the ceilings: they could have changed in August 2021, they are revised twice a year, but this was not the case. The government, unsurprisingly, preferred the status quo to a push.

So, the Livret A (capped at 22,950 euros) and the LDDS (capped at 12,000 euros) continue to yield only 0.5% per year. LEP (capped at 7,700 euros), for its part, offers an interest rate of 1% and should therefore be preferred by savers who have access to it.

With inflation on the rise, savers are losing money

Unfortunately, these interest rates, which have been very low for several years, are not favorable to savers. The latter even end up losing money, especially this year 2021 when inflation is expected at a high level throughout Europe. In France, according to a first estimate by INSEE of July 30, 2021, inflation was 1.2% in July 2021, compared to 1.5% in June 2021. Economic forecasts point to inflation between 1% and 1.5% for the whole year.

In fact, the money placed in the tax-free Passbooks will lose value: 1,000 euros deposited in a Livret A (during the whole year) earn 5 euros in interest; but these same 1,000 euros, taking into account inflation (i.e. the increase in prices), will in reality only be worth 985 euros at the end of the year if inflation reaches 1.5%. By adding interest, so 5 euros, the real value of the money deposited in the Livret A, which will show 1,005 euros in amount, will therefore only be 990 euros in terms of purchasing power at the start of 2022 compared to the beginning. 2021.