Why might the LEP pay rate decrease?
The interest rate on the Livret d'épargne populaire (LEP) could drop on August 1, 2024, due to the continued slowdown in inflation. Currently at 5.00%, the LEP interest rate is set by the Ministry of the Economy based on a recommendation from the Governor of the Banque de France, taking into account inflation and short-term interbank rates over the past six months.
Since the beginning of 2024, inflation has shown consistent signs of slowing. In May, the year-over-year increase in consumer prices was 2.20%, the same figure as in April. Since January, when inflation reached 3.10%, a downward trend has taken hold.
If the average inflation rate remains at 2.40% through the end of June, the LEP rate could be 2.50% according to the calculation formula. However, the LEP rate cannot be lower than the Livret A rate plus 0.50 percentage points. Since the Livret A rate is frozen at 3.00% until February 2025, the LEP rate could not fall below 3.50%.
Although the decrease in the LEP rate is bad news for current account holders, it remains an attractive investment for protecting savings from inflation, particularly for low-income households. The LEP is available only to households with tax residency in France whose taxable income does not exceed an annually adjusted threshold. It offers a favorable interest rate designed to protect savings from inflation.
To open a LEP, certain conditions must be met. Each eligible person may hold only one account, with a limit of two accounts per tax household. Opening a LEP requires a minimum initial deposit of just 30 euros, and subsequent deposits must be at least 10 euros. The deposit limit has been set at 10,000 euros since October 1, 2023, including deposits and interest already capitalized. Once this limit is reached, the savings account continues to earn interest, but no new deposits are allowed.
Interest on the LEP is calculated every two weeks and compounded annually as of December 31, allowing savers to fully benefit from the interest earned on their deposits. In addition, funds deposited in the LEP are available at any time, offering valuable flexibility in the event of an urgent financial need. Finally, interest earned on the LEP is exempt from income tax and social security contributions.
