Livret A: rate, amount, ceiling and interest on the savings account

0
12

The creation of the livret A dates back to 1818. The oldest savings product available in France, the livret A is a remunerated and regulated savings account. The interest rate, as well as the maximum deposit limit, are set by the State. The funds deposited in the Livret A account are available at any time and exempt from income tax and social security contributions.

Opening a livret A is possible in any bank, indicates the Ministry of Economy and Finance. Indeed, before 2009, only Crédit Mutuel (with its blue booklet), the Caisse d’Epargne and the Postal Bank could distribute the Livret A, which is no longer the case today. Thus, the Crédit Agricole, the Banque Populaire or even LCL can also offer the Livret A.

Anyone wishing to open a savings account will sign a written contract with the bank, which will specify the authorized operations. Since it is forbidden to have more than one booklet A, the bank, at the time of an opening, will have to question the tax authorities to check whether the person who wishes to open a booklet does not already have one. As long as the bank does not have the response from the tax authorities, the opening of the Livret A account will not be effective.

Read also: Livret A at 6% in 1985: could the scenario happen again?

To close a livret A, the holder must send a registered letter to this effect to the bank where the livret is located or go directly to the branch (and ask for an acknowledgment of receipt of the request at the counter). It will be necessary to specify the references of the booklet A as well as that of the account where the funds remaining on the booklet A will be paid after closing.

According to the public service website, the closing of the Livret A will be carried out by the bank 15 working days after receipt of the request. If the closing occurs during the year, the interest will be calculated from January 1st until the closing date and credited at the time of closing.

Read also: Savings: what investments to open for a baby?

Any person, whether major or minor, can open and hold a booklet A. Certain associations, low-income housing organizations (HLM) and syndicates of co-owners can also open a booklet A, specifies article L221 -3 of the monetary and financial code.

Read also: Booklet A: why is it still so attractive?

On February 1, 2020, the interest rate for the livret A was set at 0.50% by the public authorities. Previously, it was 0.75%.

Faced with record inflation in France, Bruno Le Maire announced on Thursday July 14, 2022 a passbook A rate at 2% and a popular savings account at 4.6% from August 1st. “In the current situation, no other product offers as much security. The investment is guaranteed and the interest is tax-exempt. You can release your money whenever you want and the return is guaranteed at 2%”, specified the Minister. Economy in an interview with Le Parisien.

An expected increase which remains lower than the change in annualized consumer prices for the month of June, which amounts to 5.8%. “On the livret A as on the LEP, we have chosen to follow the recommendations of the Governor of the Banque de France. Giving an extra boost to the livret A means penalizing the financing of social housing”, a replied Bruno Le Maire.

“The upward movement of the Livret A rate will continue on February 1 of next year”, assured François Villeroy de Galhau, Governor of the Banque de France, Tuesday July 19, 2022, during the presentation to the press of the Report annual regulated savings. As the year 2022 comes to an end, the latter persists and signs: “There will be a new increase on February 1, 2023”, he confirmed in the columns of La Dépêche du Midi. If the governor did not quantify this increase, the increase seems to have been recorded for the month of February to come.

It is the State that determines the interest rate for the livret A and a reform of the calculation of the rate for the livret A came into force on February 1, 2020. From now on, according to a press release from the Ministry of the Economy dated April 19 2018, the Livret A rate is set “as the half-yearly average of the inflation rate and short-term interbank rates (EONIA)”. The EONIA rate (for Euro Overnight Index Average) is the “reference rate for day-to-day interbank lending transactions practiced in the euro zone”, explains the Banque de France. The government has also decided that the Livret A rate can never be less than 0.50% and that the rate will now be rounded to the nearest tenth of a point.

If the annual interest rate is 0.50%, and the deposit of your livret A represents 2,000 euros, then the interest over the year, paid on December 31, will theoretically be 10 euros.

In detail, the calculation of the interests of the livret A is carried out twice a month, on the 1st and the 16th day of each month, regardless of the total number of days of the month. The interests of the livret A are therefore calculated 24 times during the year and it is the sum of these 24 calculations which is paid at the end of the year. Each time, the bank calculates the interest on the booklet A for the fortnight by applying the following formula:

(balance of booklet A x rate of booklet A)/24 = interest for the fortnight.

Deposits and withdrawals from the livret A are not taken into account in the same way in the calculation of interest from the savings account:

The accumulated interest for the 24 fortnights of the 12 months of the year is added up and paid into the Livret A account on the last day of the year, each December 31.

Read also: Booklet A: why the rush for this unattractive product continues?

An individual can deposit up to 22,950 euros on his livret A. The ceiling for the livret A reaches 76,500 euros for associations. These ceilings do not take into account capitalized interest.

The minimum balance of a livret A is zero euros. The livret A cannot be a debtor.

It is possible to withdraw money from the livret A at any time, by bank transfer between its various accounts. It is also possible that the bank issues a withdrawal card for Livret A, which allows cash withdrawals exclusively via ATMs in its network. The minimum amount for a deposit or a withdrawal from the Livret A is 10 euros in all banks except the Postal Bank, where this minimum is 1.5 euros.

To deposit money in your Livret A account, it is possible to make one-off or periodic transfers or even go to the bank counter to deposit cash or a check.

Read also: How many savings books can you have?

The Livret A booklet is not subject to any tax, income tax or social security contributions.

All funds deposited in the Livret A savings accounts, regardless of the banking establishment, are centralized at the Caisse des dépôts et consignations, which manages the money thus available. More precisely, according to the Caisse des dépôts website, 60% of the funds actually land in the coffers of the public financial institution, and 40% of the funds deposited remain in the banks to remunerate savers. The Caisse des dépôts then uses the funds from the Livret A account to finance projects of general interest, in the form of loans.

They will thus make it possible to finance, historically, the construction of social housing, but also “urban renewal operations or even various infrastructures for local authorities (hospitals, universities, transport (tramway), water networks, very high speed digital , etc.)”, indicates the Caisse des dépôts. Part of the savings accounts A will also be invested by the Fund in various financial assets, mainly bonds and shares in French companies, to guarantee savings in the event of withdrawal of money by savers.

Since January 1, 2012, it is no longer possible to transfer a livret A from one bank to another. The only solution: close the Livret A account in the banking establishment that you want to leave (an operation that takes 15 working days) to open a new one in the other bank. As long as the old savings account is not closed, it is impossible to open a new A account. Indeed, during an opening, the bank consults the tax authorities to find out if the future holder of the A account don’t already have one open.

No, it is forbidden to have more than one A booklet. Having several A booklets is liable to a tax fine equal to 2% of the amount of the supernumerary booklet, according to article 1739 A of the general tax code. However, if the fine is less than 50 euros, it will not be recovered.

Read also: Booklet A: will your money be taken to finance the recovery plan?

The sustainable development and solidarity booklet (LDDS), formerly known as the sustainable development booklet (LDD), is a regulated savings product, which can be offered by all banks.

LDDS

A booklet

Availability of funds

at any time

at any time

Ceiling maximum

12 000 euros

22 950 euros

Rate of pay

0.50% since February 1, 2020 (the rate is aligned with that of the Livret A)

0.50% since February 1, 2020

Taxation

Interest is exempt from income tax and social security contributions

Interest is exempt from income tax and social security contributions

Detention

No more than one LDDS per person and two LDDS per household

No more than one booklet A per person

Minimum deposit

No legal minimum, but some banks impose a first payment of 15 euros at the opening and require that the minimum balance of the LDDS be 15 euros

The livret A cannot be a debtor

The interest calculation method is identical to the livret A and the LDDS. Note that it is possible, for a person, to have an A booklet and a sustainable and solidarity development booklet. These two booklets are also available for minors.

Like the Livret A savings account, part of the sums deposited in the sustainable development and solidarity savings accounts are centralized by the Caisse des dépôts et consignations. These funds will then be lent by the Caisse des dépôts to finance projects of general interest, such as the rehabilitation of social housing. The LDDS also makes it possible to contribute to the financing of small and medium-sized enterprises (SMEs) and the social and solidarity economy, indicates the website of the Ministry of Economy and Finance.

Finally, a notable difference between the Livret A and the LDDS is the possibility of making a donation from the LDDS. Indeed, since October 1, 2020, LDDS holders can make a donation directly from their savings account to the social and solidarity economy. Each year, banking establishments present customers with an LDDS with a list of at least 10 beneficiaries to receive donations. The bank selects the beneficiaries. These are structures of the social and solidarity economy, such as associations, foundations or even mutual societies or solidarity financing organizations, taken from the national list of companies in the social and solidarity economy. Passbook holders can then make one or more donations from the amount available on their passbook, in favor of the structures retained by the bank.

Read also: What will soon change for your savings account

The Livret A can be combined with other savings books such as the People’s Savings Book (LEP) or the Sustainable and Solidarity Development Booklet (LDDS). It is also possible to have a booklet A and also to hold life insurance, a home savings account (CEL) or a home savings plan (PEL).

The sums deposited in a livret A benefit from the guarantee of the State, indicates the Banque de France, within the limit of 100,000 euros per saver and per banking establishment.