On the occasion of the World Savings Day, here are five ideas, more or less risky, to invest and grow these savings.
“The health crisis has only reinforced this propensity to save without investing. In other words: to put aside, especially during the lockdown, while keeping this nest egg under one’s mattress (or almost) – whether for fear of “blocking” one’s funds in an uncertain context, or of losing money on risky supports”, notes Albert d’Anthoüard, Director of Private Clients at Nalo. And the second confinement will only encourage the French in this direction. In this context, what to do with one’s savings?
1. The classic savings books
Without expenses and guaranteed by the State, the booklet A allows to pour or to withdraw money at any time. Interest is exempt from income tax and social security contributions. The Livret de développement durable et solidaire offers the same advantages, but its ceiling is 12,000 euros compared to 22,950 for the Livret A. For its part, the popular savings book, limited to 7,700 euros and reserved for the most modest incomes, offers a yield of 1%. For short term investments, the Livret A and LDDS are still essential, even if their remuneration, fixed at 0.5%, will not increase for a long time.
Due to inflation estimated at 1.1% in 2019 by INSEE, the purchasing power of savings placed in a Livret A is decreasing. “Doubt and fear of tomorrow prevail in this period. The Livret A remains the best answer, but we need to go further,” says Yves Mazin, vice-president of the CNCGP and manager of Vision Patrimoine.
2. The insurance for life
Since the beginning of the health crisis, savers are now withdrawing more than they are depositing in their life insurance policies. Between January and July, the collection was -5.2 billion euros, against + 17.3 billion euros in 2019 over the same period, according to the French Federation of Insurance. “What is plummeting is the yield in euro funds. The units of account on the other hand follow the stock market weather. Today the saver who invests on units of account will not lose, but he must want a long-term investment”, indicates Yves Mazin.
The advantage of this investment? To vary one’s savings in a single vehicle. “It’s a liquid investment that can be diversified ad infinitum with SCPIs, shares and bonds,” insists Alain Iteney, manager of Arthus Conseil. Contrary to a widespread idea, the savings are not blocked for 8 years, it is only the duration which allows to benefit from the most favorable taxation.
3. Real Estate
If you have enough reserves to deal with unforeseen events, it is interesting to position yourself in less liquid assets. And real estate is one of them to take advantage of the still very low interest rates. The sector is resilient thanks to sustained demand in and around major cities and competitive yields that should help maintain asset prices. However, taxes and fees on real estate remain quite high. It is essential to include them in the calculation of the return. “The purchase of bare ownership allows to avoid the heavy tax burden during the whole period”, suggests Didier Bujon, Managing Director of Equance. Opting for this solution requires time: bare ownership lasts on average 17 years…
“The first wave of the Covid-19 was not sustainable enough to impact the resilience of the real estate market and therefore prices in Q2 2020,”. But what about the second one? Its effect could significantly reduce volumes, with practical problems adding to the lack of confidence and new fears about buyers’ solvency. This could of course also impact prices. A correction that could generate opportunities for those who know how to be selective. On the tertiary property side, concern is the order of the day. Even if the stone remains a refuge value, the difficulties of payment of the rents during the crisis also risks to involve a fall of the valuations of the funds of the SCI and SCPI. “While rent collection and new investments were almost back to normal, this possible reconfinement could bring the sector’s recovery to a halt,” says Pierre Garin, director of the Linxea real estate division. Shopping centers and hotels are the most affected assets, while healthcare, logistics and residential are resisting. As for offices, they are protected for the moment by firm leases, but the next few years could be more difficult. “You should always look to diversify within the real estate asset class,” says Souleymane-Jean Galadima, director of private investor relations at Mata Capital.
4. The retirement savings plan
Created by the Pact law of May 22, 2019, this investment is currently a tool for preparing for retirement that offers a tax bonus in the form of a deduction from taxable income. For example, a saver whose marginal bracket is 30% and who invests 10,000 euros will get a tax reduction of 3,000 euros. “The tax deduction can be made upstream and the exit can be made in capital,” explains Alain Iteney. As with life insurance, the level of risk taken in the asset allocation will be determined according to what the investor decides to put into his or her PER.
Please note that, with some exceptions such as the purchase of a principal residence, the funds are not available before the date of retirement. No legal minimum is required to have access to this investment, although some insurance companies do require one.