The Livret A rate will increase, a first in more than ten years

The Livret A "will go from 0,5% to 1%", announced Bruno Le Maire, guest at the 13 p.m. newspaper of TF1. "For the People's Savings Book (LEP), it's more than a doubling, it will go from 1% to 2,2%," continued the Minister of the Economy.

The government has thus chosen to follow the recommendations made earlier in the day by the Governor of the Banque de France François Villeroy de Galhau, in charge of calculating these rates.

A rate of return at 1% "would be likely to better ensure the remuneration of the holders of the Livret A, without creating too high an additional cost, in order to preserve the financing of social housing", one of the missions of this savings product , much appreciated by the French, justified the governor in a press release.

The last increase in the Livret A dated back to August 2011, when it went from 2 to 2,25%. It has only stagnated or fallen since then, falling in February 2020 to 0,50%, a historic low.

"Symbolic gesture"

The Livret A rate is calculated twice a year by taking the average between, on the one hand, the average inflation rate of the last six months and, on the other hand, the average of the interbank rates, at which the banks are exchange money in the short term.

However, inflation has accelerated significantly in recent months, reaching +2,8% in December over one year, according to a figure published Friday by INSEE.

With a 1% rise in the Livret A rate, the net return on savings is therefore strongly negative (-1,8%), which means that the value of deposits is depreciating.

The mechanical application of the formula "would result in a Livret A rate of 0,8%", further explains the Banque de France, which chose "in view of inflation in the second half of 2021" to round off the proposed increase at 1%.

The rounding "is the only surprise", reacted to AFP Philippe Crevel, director of the Cercle de l'épargne, the minister having already announced in December that the rate would be increased without specifying by how much.

"It's a boost on the eve of the presidential election, a small symbolic gesture," continues Mr. Crevel.

The total annual remuneration will for example increase this year from 76,5 euros to 153 euros for a holder with 15.000 euros in assets, calculated the Circle of Savings, if however the rate were to be maintained on August 1.

LEP boosted

Despite a relatively low level of remuneration, the Livret A has become a safe haven investment for savers during the health crisis which has seen its outstandings jump.

It was at the end of November 343,4 billion euros, according to the latest figures from the Caisse des Dépôts (CDC). As of December 31, 2020, the number of Livret A savings accounts stood at 55,7 million, according to the Banque de France.

The Minister of the Economy also insisted on the importance of the LEP, a placement reserved for people with modest incomes (maximum 20.296 euros per year for a single person).

"We are going to ask the banks to promote this booklet and we will send in the coming days (...) an email to all French people who are entitled to it", explained Mr. Le Maire, specifying that this would protect better against inflation.

The LEP benefits from a guaranteed interest rate and is exempt from income tax and social security contributions. It is capped at 7.700 euros in payments (excluding interest).