France's 'livret a' savings rate set to drop

WITH A PREDICTED DECREASE TO 2.6%, EXPERTS QUESTION THE VIABILITY OF FRANCE'S FAVOURITE TAX-FREE SAVINGS ACCOUNT  The rate of France’s most popular savings account – the tax-free

state-regulated Livret A – is predicted to drop to around 2.6% in February next year, leading some savers to wonder if it remains investing in. The rate has been fixed at 3% since summer

2023, but is almost certain to drop again at the next review, experts say. It comes as an 18-month freeze announced by the government is set to end. However, it previously dropped as low as

2% in August 2022, 1% in February the same year and a historic low of 0.5% in February 2020, which was maintained for two years. Read more: Is French Livret A account interest taxable in UK?

BETTER INTEREST RATES ELSEWHERE? The Livret A has existed for more than 100 years, reaching a high of 6.5% in 1984. The rate is usually set by a formula which combines inflation in the

previous six-months and short-term European interbank loan rates. For several months now, inflation has been lowering (from 3.1% in January year-on-year to 1.9% in August), and it is

expected to settle at around 1.8 to 1.9% for the second half of 2024. Analysts note that overall, for savers, the ‘freeze’ did not help, as in fact the rate would have naturally risen higher

for most of the period if it had not been in place. For those with annual income below certain maximums, the Livret d’Epargne populaire has been a better bet, currently set at 4%. For those

willing to tie up their money for longer, a euro fund in an assurance vie can in some cases give a better interest rate than the Livret A. Read more: How do French financial products

compare to those in UK and US?