The Livret d'Épargne Populaire Is Becoming a Safe Haven Against Inflation
With the interest rate on the Livret A savings account frozen at a level well below inflation, the Livret d'épargne populaire (LEP) is set to benefit from the increase in its deposit limit to 10,000 euros this fall.
Since the government has decided to follow the Banque de France’s recommendations by keeping the Livret A interest rate at 3% for 18 months, more and more savers are turning to the LEP.
This savings account, aptly renamed, actually offers twice the return: 6%, with no tax on the interest paid by the bank where it was opened. Last year saw a dramatic increase in the number of holders of “livrets d’épargne populaire” savings accounts: +24.9%.
9 million cardholders out of 18.6 million eligible people
Unsurprisingly, this enthusiasm among those authorized to open one has continued this year. The most recent figures published by the Banque de France in its annual report on regulated savings show an increase in the number of account holders, rising from fewer than 7 million at the end of 2021 to 9 million last February.
However, this figure of nine million must be put into perspective. It remains well below the number of people whose incomes fall below the threshold required to open an LEP. According to data from the tax administration, 18.6 million taxpayers are currently eligible for the LEP.
It is also a far cry from the level of popularity the LEP enjoyed before the 2008 financial crisis. Following the sharp rise in unemployment that ensued, the number of account holders (13.2 million in 2008) has steadily declined, ending up at a level nearly half that figure in 2021.
The renewed interest in the LEP is also reflected in the amounts that low-income savers have deposited into it to protect their savings from inflation. Deposits increased by nearly 10 billion euros in one year, reaching 47.9 billion euros. On average, LEP account holders therefore have a balance of 5,700 euros.
More than 3,000 euros at three-quarters of the LEPs
Currently, the balance in nearly three out of four savings accounts (71%) exceeds 3,000 euros, representing nearly two months’ worth of salary or retirement pension. The income limit for a single person to open an LEP is 1,780 euros per month, an amount well above what is typically seen in Livret A savings accounts held by more than 55 million savers. The majority of them (51%) have less than 1,500 euros in these accounts.
Another telling statistic highlights the important role played by the LEP as a financial reserve. In half of all cases, French citizens can no longer deposit any more money into their accounts. In fact, 47% of them have reached the 7,700-euro limit. That is why the Ministry of the Economy has decided to raise it. By this fall, it will therefore increase to 10,000 euros.
Many current account holders who are “stuck” at the limit should therefore transfer as much of their savings as possible from their Livret A accounts to their LEP accounts. This shift could easily push the total amount of money deposited by the French into this account—the only one of its kind in Europe—past the 50 billion euro mark.
