As per our data, France ranks third in Western Europe in terms of retail deposit balances, with 69.4% of the country’s onshore investments allocated in these products. This is unsurprising, as the government provides a series of regulated savings accounts that are tax-free.
According to Banque de France, the most popular are the Livret A and Livret de Dévéloppement Durable (LDD) accounts, but other accounts targeted at lower-income individuals and young people are also available.
Livret A is a savings account that allows any individual (including minors) to make a deposit of a maximum of €22,950 ($24,149) and receive a fixed return of 0.75% per annum. The returns from this account are not liable for income or capital gains tax, which makes it similar to the UK’s ISA accounts. The main difference is that Livret A is also available to non-residents, and the interest rate is set by the government – meaning it is the same regardless of bank.
The LDD account, which can be opened in conjunction with Livret A, is reserved for French tax residents. The interest rate is the same as Livret A, and the maximum deposit is €12,000 ($12,627). Funds are available to withdraw at any time for both of these accounts, but while UK ISAs have yearly contribution limits, the Livret deposit limits refer to the total account balance (excluding accrued interest).
Due to the deposit limits, Livret accounts are not primarily designed for HNW individuals (although they will certainly be happy to have any share of their wealth held tax-free). Yet banks will do well to include them in their propositions to engage with emerging and mass affluent clients, and first-time investors in particular. As such individuals tend to be more risk-averse than experienced investors, Livret accounts will offer steady returns (the market is affected only by government decisions) well above other savings products.
If the first step into the investment arena occurs in such safe and rewarding conditions, advisors will find no difficulties in establishing trust and, in the long term, managing a greater portion of clients’ growing wealth.
By Silvana Amparbeng, Wealth Management Analyst