Livret A and LDDS record their 2nd best annual collection in 2020
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This is a common behaviour in times of crisis. In the context of the Covid-19 pandemic, the French massively filled their A and LDDS passbooks in 2020, preferring the security and liquidity of these regulated products to the possible capital gains of other investments. Widespread in France, the Livret A passbook attracted twice as many savings in 2020 as in 2019, and brought in 26.4 billion euros, announced the Caisse des Dépôts (CDC) on Wednesday 20 January.
In December alone, around €840 million net were withdrawn from the Livret A passbook savings account, but these amounts were offset by very high levels of inflows in the preceding months, particularly at the beginning of the year during the weeks of containment linked to the outbreak of the health crisis. "The year 2020 has been characterized by a major crisis, with a forced drop in consumption due to the various phases of containment and a fear of the future that has given winners first the current accounts (editor's note), then in second place the Livret A and the LDDS", analysis for the AFP Philippe Crevel, director of the Cercle de l'épargne, a think tank on savings and its regulation.
The success of the Livret A passbook, which nevertheless guarantees a historically low interest rate of 0.5% a year, contrasts in particular with the large withdrawals recorded on life insurance policies. In December, the Livret de développement durable et solidaire (LDDS) savings account signed a net inflow of just over €1 billion, bringing the total amount collected in 2020 by this investment to €8.8 billion, twice as much as in 2019, when €3.9 billion was collected.
35.2 billion euros raised in one year
Managed jointly by the CDC and the banking networks, the Livret A passbook is mainly used to finance social housing, while the LDDS is dedicated to the social and solidarity economy and energy savings in housing. Between them, the Livret A and LDDS earned 35.2 billion euros net in 2020, compared with 16.6 billion euros in 2019. This is the second highest annual net inflow of new money after the record €49 billion in 2012.
"That's 50 euros per month per passbook. It's a record since 2012, it's huge," Eric Lombard, CDC CEO, commented on Wednesday on RTL. "It is related to the fact that the French could not consume, because of the confinements, because of the closed stores. It is therefore an economy that is really forced, that is constrained," he added.
Maintaining the attractiveness of the Livret A in particular is explained, according to him, by the fact that "it is a product that is very safe, the remuneration is positive (...) and it works like a bank account", in a "very flexible" way. In total, the outstanding savings stored in the two passbooks amounted to 448.3 billion euros at the end of December 2020.
Life insurance sulked
These figures contrast sharply with those for life insurance, by far the leading investment in France with nearly 1,800 billion euros in outstandings, but which has been very strongly shaken by the health and economic crisis. In March, April and May, two billion euros were withdrawn from life insurance each time. In the following months, withdrawals continued, but on a less massive scale.
Over the first 11 months of the year, life insurance companies saw a withdrawal of 7.3 billion euros, compared to more than 23 billion euros over the same period in 2019. "The security and liquidity offered by the Livret A and LDDS passbook savings accounts have been hailed by savers," summarizes Philippe Crevel.
If the vaccination campaigns do indeed allow the economy to recover in 2021, savers could regain confidence and direct their savings towards riskier investments.