Save yes… but on what? This question, which many French people are asking, is more relevant than ever with the decline in interest rates observed in recent years, affecting the profitability of traditional “safe” investments.
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This question is particularly relevant for savings investments.
Savings have always been a major concern for a large number of French assets, especially regarding financing their retirement. Let us remember that we have one of the highest savings rates per household in Europe, with just over 14% of gross disposable income saved in 2019.
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At the end of the tax declaration period conducive to reviewing your financial situation, it seems wise to encourage you to take stock of your current investments and consider new investment avenues.
Since February 1, 2020, the interest rate on the Livret A has dropped to 0.50%, having been set at 0.75% since August 1, 2015. A level not seen since its creation in 1818. Today, €10,000 placed in this savings account will yield you €50 per year and €115 if your account is filled to a ceiling of €22,950, which is to say very little.
The same observation applies to the LDD (Livret Développement Durable), whose rate is reduced to 0.50%, and the CEL (Compte d’épargne logement), which only represents 0.50% gross, or 0.42% net of social deductions.
These regulated savings accounts are no longer intended to pay your money under good conditions and are only dedicated to preserving savings in the short term aimed at covering unforeseen life expenses.
In this context of very low traditional savings remuneration, it is more important than ever to think about how to optimize your investments and turn to other vehicles that can accommodate your savings and make them grow.
Be careful not to be fooled by the so-called “super savings accounts” whose attractive introductory rates of 2 or 3% last only a few months. Moreover, you will be taxed on the interest generated and will quickly find a level of remuneration close to that of a Livret A or LDD over a one-year period.
We will therefore examine four investment avenues that will meet your expectations regarding savings investments.
1. Life Insurance
Life insurance is one of the preferred investments of the French, with over €1,785 billion in force at the end of August 2019. This tax envelope allows for a particularly advantageous tax framework with a decreasing tax on the interest generated over time, and the possibility of transferring the capital to beneficiaries of your choice without inheritance tax.
There are two main types of support within this envelope:
- The euro fund, managed directly by the insurance company and which guarantees your invested capital at all times. On this support, you can benefit from a yield higher than that of bank savings accounts, with a net yield of 1.40% on average in 2019, before the impact of social deductions. Be careful, there are disparities between euro funds depending on the selected insurer and the composition of the managed asset.
- Unit-linked accounts, which give you access to a very wide investment universe through vehicles that can invest in the main asset classes in the world: stocks, bonds, currencies, commodities, real estate… The expected return on this type of support is generally higher than that of the euro fund, over the recommended investment horizon, but your capital is not guaranteed.
Once again, there are significant disparities between the funds you can select. A heritage fund, for example, is likely to offer you an average return of 4% per year over five years, while maintaining a controlled risk level. Whereas if you are on a fund invested solely in stocks, you will be able to achieve a higher return, but with a higher risk level.
In any case, whether it is euro funds or unit-linked accounts, you must accept the idea of leaving your savings in your life insurance for a minimum of eight years to achieve the product’s optimal tax benefits. Of course, withdrawals are possible at any time and are generally processed quite quickly (around fifteen days), but your interest will be taxed based on the holding period.
Life insurance is therefore considered part of medium-term savings and is now the best alternative for investing your savings.
Our selection of life insurance:
Cardif Elite. Life Insurance Savings Investment 2020 Learn more 
SwissLife Strategic. Life Insurance Savings Investment 2020 Learn more 
Primonial Serenipierre. Life Insurance Savings Investment 2020 Learn more 2. The PEA (Plan d’épargne d’actions)
The PEA is an excellent investment vehicle for your available savings. Beyond five years, gains are completely exempt from income tax and only social contributions are due. This is an undeniable tax advantage at a time when taxation on investment income remains high.
However, unlike life insurance, this product is less flexible as you are limited to a maximum contribution of €150,000 and only one PEA is allowed per person. Moreover, you will have to wait 5 years to make withdrawals from your plan without causing closure.
However, by carefully selecting your stocks and choosing quality funds eligible for the PEA, you will be able to achieve excellent performance at the end of the five years and especially your gains tax-free.
Our selection of PEA:
PEA Échiquier Financial. Equity Savings Plan (PAE) Savings Investment 2020 Learn more 3. The RP (Régime d’épargne-retraite)
The PER was established by the Pacte and is intended to replace the old system in order to now have a single retirement product. In the current context, capitalized retirement is increasingly on the rise. Indeed, to maintain the pension system in its current state, the French will have to contribute more while knowing that they will receive less at retirement. This is why this product specifically focused on retirement is attracting more and more interest, also due to the possibility of deducting payments from taxable income within the limits set by law.
The principle of the PER is quite simple. It involves regularly saving on the supports of your choice, eligible for the contract, and at the time of your retirement, you will have the choice between subscribing to your plan in the form of an annuity or in the form of capital.
Another advantage of the PER, which also explains the growing interest of many taxpayers in this product, lies in its virtues in terms of tax exemption. In fact, all payments made under your plan are deductible from your taxable income within a limit to be respected.
Let’s take a concrete example: Taxed at a marginal tax rate of 41%, you pay €10,000 into your PER this year. You can deduct this amount from your taxable income and benefit from a tax reduction of 41% x €10,000, or €4,100.
However, it is important to specify that the savings accumulated in the plan are blocked until your retirement except in the case of early release such as the purchase of a primary residence, the death of a spouse, disability… This can be seen as a major disadvantage, but let us not lose sight of the main objective of the PER, in the form of your own retirement by ensuring a supplementary income until the end of your life through the pension or to benefit from the capital at retirement.
Our selection of PER:
PER SwissLife Individual. Retirement Savings Plan (PER) Retirement Investment 2020 Learn more 
PER Cardif Essentials. Retirement Savings Plan (PER) Retirement Investment 2020 Learn more 
PER Eres. Retirement Savings Plan (PER) Retirement Investment 2020 Learn more 4. The Madelin Law
The Madelin Law is a tax regime designed to allow self-employed workers (TNS) to build a supplementary pension to compensate for the weakness of benefits from their mandatory scheme.
This system can be subscribed to until September 31, 2020, at the latest.
This system, which operates on the same principle as the PER, allows TNS to deduct contributions from their professional income within higher limits than the PER.
Let’s take the example of an entrepreneur who makes a profit of €100,000 in 2014. He will be able to pay and deduct just over €19,000 from his income, whereas for a PER, payments would be capped at €10,000.
The downside of this contract remains that the accumulated savings are blocked until retirement age in their entirety. It is therefore not possible to recover the invested money except in exceptional cases.
However, the Madelin retirement contract makes sense for someone who wants to protect themselves for retirement and obtain a guaranteed supplementary income until the end of their life.
Our selection of Madelin law contracts:
Madelin Retirement SwissLife. Madelin Law Retirement Investment 2020 Learn more
In conclusion, we strongly recommend reducing the amount of funds present in regulated savings accounts, in order to retain only precautionary savings. The disinvested amounts can be placed in the products mentioned above to maximize their remuneration and benefit from the many advantages they bring. Of course, this new allocation of your savings should be made according to your above wealth objectives.