Against a background of war in Ukraine and soaring commodity prices, inflation jumped to 4.8% in April. This is its highest level since November 1985. Something to worry savers, who are struggling to protect their capital against rising prices.
In recent months, inflation has been making a comeback. According to estimates by the National Institute of Statistics and Economic Studies (Insee), the price spike over one year reached 4.8% in April. And the situation should not get better anytime soon: still according to INSEE, inflation could rise 5.4% over a year by next June. What seriously hone your purchasing power if you do not invest your money.
The problem is that after adjusting for inflation, most traditional savings products currently serve a negative return. For example: if you place 100euros 3%, you will have 103euros a year later. But will you be richer so far? Not necessarily. Because if at the same time the prices increase by 4%your purchasing power will have diminished.
That’s the whole point of looking at the real return of your savings products. It is obtained from the following formula:
For which r corresponds here to the yield and I inflation. Since INSEE has not yet released an estimate for annual inflation for 2022, the calculations made in the rest of this article are based on the latest available figures, namely +4.8% price increase in April.
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Livret A and LDDS: -3.6% real return
In 2022, the savings account preferred by the French recorded 3.02 billion euros collection last March, according to the Caisse des Dpts. Its false twin, the Sustainable and Solidarity Development Booklet (LDDS), is not to be outdone: the French have deposited 0.65 billion euros over the same period. Assessment: at the end of March, the total outstanding amount on these two passbooks reached 483.6 billion euros. A success which is explained in particular by the revaluation of their rate 1%last February.
Despite the increase, the Livret A account actually loses purchasing power to 56million French people holders of this investment in 2022. In detail, for 10000 euros placed on your Livret A from January 1 to December 31, 2022, you will receive 95.84 euros net of taxes (and not 100 euros because the month of January remains 0.50% remunr). But at the same time, inflation would cause you to lose 4.8% of purchasing power (assuming that the rise in prices over one year remains at its current level). Let be a real return of -3.6%.
Positive point: the calculation of the Livret A rate is based on interbank rates and half-yearly inflation. If the price spike continues, the Livret A and LDDS rates could therefore increase again in 2022. However, even in the event of another rate hike 1.5%the real return on these investments would remain in the red.
Livret A, LEP: what rate to expect for next August 1?
Popular savings account: -2.5% post-inflation
The People’s Savings Booklet (LEP) is doing better than the other booklets. For a long time, its rate was indexed to that of the Livret A, with a bonus of 0.5 point. But the new formula calls for the LEP rate to be at least equal to the price increase, or 2.2% in the last half of 2021.
As for the Livret A and the LDDS, the gains received on your LEP are totally exempt from taxes. Result: With its current rate, a LEP with 5000 euros brings you back 105 euros net interest over one year. Again, this is not enough to protect against rising prices: after deducting inflation, the real yield of LEP reaches -2.5%. However, this figure is only an estimate. Especially since if inflation remains at its current level, the LEP rate could jump 4.4% by August 1st.
Popular savings booklet: 3 uplifting figures on LEP
Bankbook: -4.5% return after inflation
In addition to regulated savings accounts, such as Livret A, LDDS and LEP, some banks offer their own savings accounts. In March 2022, the average return on these investments barely represents 0.10%, according to figures from the Banque de France. A historically low rate.
Without forgetting that, unlike regulated passbooks, bank passbooks are subject to a single fixed charge (PFU) of 30% (1). i.e. a return net of taxes of 0.07%. At this rate, you would need over 1000 years to double your savings. Worse: once inflation is taken into account, the real return on these investments reaches on average -4.5%be the worst score of this list.
Bank passbook: why it no longer earns you anything
PEL: -3.9% real return (worst case)
This is one of the strengths of the Housing Savings Plan (PEL): its contractual rate, fixed at the start, remains unchanged until the end of the plan. As a result, some old PELs still report 2.5% even 3% their owner. The more recent ELPs, on the other hand, are less generous, with a rate of 1% before tax
On the tax side, plans opened since 2018 are subject to flat tax (30%) from the first year of ownership. Let a yield of 0.7% net of tax In other words, for 10000 euros invested in a recently opened PEL, you should pocket 70 euros of interests. This is little. In any case, too little to protect you from inflation, since in this case the real rate served by the frieze PEL –3.9%. The housing savings account (CEL) is not faring any better, with a real return of -4.1%.
Livret A, PEL, life insurance: how many years to double your savings without risk?
Life insurance: -3.5% after inflation for euro funds
The tumble continues for the rates of euro funds, the risk-free support of life insurance. After 1.46% average return in 2019, euro funds reported 1.3% in 2020 and 2021, according to France Assureurs.
These returns are net of management fees, but not net of taxes. On recent contracts, you have to deduct social security contributions (17.20%) from your annual interest. For a gross return of 1.3%so you will only pocket 1.08% of interests. Not to mention that your winnings may be subject to income tax depending on the amount and date of your withdrawals. Excluding inflation, euro funds also show a negative relative return (-3.5%).
Life insurance: comparison of offers
PER and salary savings: -1.7% purchasing power
Impossible, by definition, to announce an average return for an employee savings plan, invested in a handful of investment funds, or for a retirement savings product, invested in the same way over a distant horizon. Nevertheless: it is possible to form a representative idea. According to a study by the French Association of Financial Management (AFG), the pilot management of retirement savings plans (PER) in companies currently allows us to hope 1.7% 5.3% annual performance. If we take the example of a PER with a return 3%for 10000 euros placedyou should record a capital gain of 300 euros at the end of the year.
But… with inflation at 4.8%, you actually risk seeing your purchasing power decline (-1.7%). And this, before taking into account the taxation of the PER, namely 17.2% social security contributions + income tax, more or less important depending on the tax options you have chosen.
Retirement savings plan: the costs that must be successfully compared
SCPI: a real return of -0.3% before taxes
In 2021, civil real estate investment companies recorded a collection of 7.4 billion euros. This is 20% more than the previous year, according to estimates by the French Association of Real Estate Investment Companies (Aspim) and the Institute for Real Estate and Property Savings (IEIF).
SCPIs owe this success above all to their excellent average yield: 4.5% (net of fees) in 2021. It is by far the investment in this ranking that best resists price increases, since after taking inflation into account, SCPIs show a real yield of -0.3%. Black point: SCPIs are heavily taxed, since social security contributions (17.2%) are added to the progressive scale of income tax.
SCPI: What yield? How to invest? Our advices
(1) For all investments subject to the single flat-rate deduction (PFU), low-income households can claim an exemption from the deposit and opt for taxation at the scale if they are not taxable.
(2) Breakdown of €96.2 billion in diversified assets (excluding employee shareholding) in employee savings and collective company pension savings, at the end of 2020. Source: AFG.