The euro funds of certain life insurance contracts remain more profitable than the Livret A.
Adapted to precautionary savings, the Livret A, whose rate of return doubled on August 1, to reach 2%, is not a panacea for long-term investing, unlike life insurance. Insights from Gilles Belloir, Managing Director of Placement-direct.fr.
Paris Match. Can life insurance compete with Livret A?
Gilles Belloir. The euro funds of life insurance contracts, with guaranteed capital, returned 1.30% in 2021, before social security contributions, i.e. a little more than 1% after deduction of these deductions. On paper, the Livret A yields twice as much as this euro fund. But the situation is more nuanced: the rate of 1.30% is an average. The returns provided by insurers are heterogeneous. Everyone chooses their remuneration according to their commercial policy.
Is the remuneration uniform within the same contract?
With some insurers, it can vary according to the allocation retained by the customers: the greater the proportion of financial supports called “unit-linked” – where the risk is borne by the saver –, the higher the rate paid on the fund. euros is increased. This mode of operation has enabled certain companies, in 2021, to pay up to 2.90% of remuneration before social security contributions.
What about fees?
Low fees contribute to better performance. The regulations have favored the transparency of fees since June: it is easy to find on the Internet contracts offering attractive returns with, in most cases, a level of fees levied much lower than other distribution methods, for example to those you find in your traditional bank. Another criterion to take into consideration: access to the euro fund, closed by many insurers to customers who wish to invest exclusively in this medium.
However, protection against current levels of inflation is not guaranteed…
If you want to have a 100% guaranteed capital, protecting against inflation is difficult, unless you have time in front of you. Over a long horizon, ten to fifteen years or more, the Cac 40 can provide you with an annual performance of around 6%, close to the inflation that we have seen over the past twelve months.
Also read. Livret A: the government raises the rate to 1% from February 1, announces Le Maire
What method can we follow?
Save gradually through scheduled payments, to smooth your entry point and limit the risk of loss. The good idea is to combine within the same contract long-term investments – for example, to prepare for your retirement – and short-term savings, the latter pocket corresponding to the fund in euros. Your long-term investments will allow you to benefit from a bonus on the rate of return paid on the euro fund. Proceeding in this way can also allow you to prepare projects at intermediate time scales, with a dose of euro funds depending on your holding horizon and your degree of risk aversion.