Popular savings account (LEP) at 6%, super savings accounts at 5%, Livret A frozen at 3%… As interest rates rise, the return on your savings is the highest. But for how long? The European Central Bank’s (ECB) recent decision to end a streak of 10 consecutive rate hikes has raised fears among savers that the end of the recession will soon be blown. Fortunately, there is a solution to extend the party: a term account (CAT), which allows you to lock in a very high level of current returns for a period of one to five years.
“With a three-year term account, you’re guaranteed to maintain an attractive income throughout this period, even if rates drop in six months or a year”, explains Hugo Bompard, president and founder of the Finance Héros website. The main limitation of this investment is that you have to agree to immobilize part of your savings for the entire time deposited, without being able to touch them: no further payments after the initial deposit – and therefore only – and no withdrawal before maturity (if penalties are paid). It is this blocking of your capital that is rewarded: “In exchange for a fixed investment period, the bank guarantees you a predetermined rate”summarizes Souleymane Galadima, CEO of Sapians, a digital wealth management platform.
“Never seen” prices since 2008
And currently, these rates set at signing are very attractive: with the best term accounts, it is possible to achieve returns between 3.5% and 4.8% per annum. “Unheard of since the last big craze for term accounts, before the 2008 crisis”, recalls Gilles Belloir, CEO of online broker Placement-direct.fr, which has just launched a term account whose reward usually increases with the length of your commitment. Specifically, a rate of 3.2% for a one-year period, 3.3% per annum for CAT subscribed for two years, 3.4% for three years, 3.45% for four years and 3.5% for 5 years.
Fixed or progressive returns depending on offers
Like many players in the market, the broker chose a term account with a fixed rate. In other words, if you opt for a 5-year maturity, for example, your savings will earn 3.5% per year for 5 years. This is also the case with Boursorama, but only for 12 or 18 months: you get 3.5% for one year and 1.75% (ie the 3.5% rate applied half-yearly) plus six months if you commit to a year and a half.
The same principle in Distingo bank, with a fixed annual rate that also increases depending on the holding period: 3.1% for one year, 3.15% for two years, 3.2% for three years. With Ramify, the interest rate is 3.1% for one year, 3.25% for two years and 3.5% for three years.
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In addition to these annual fixed rates, you will also find term accounts with progressive rates. The difference? Your rate increases from year to year, so it’s not fixed throughout the term. For example, in Monabanq, the holding period is fixed (5 years), with 1.6% paid out in the first year, 2.3% in the 2nd year, 3% in the third year, 3.4% in the fourth year and 4.8%, which is the highest rate. more than one year, in year five. Or an average annual rate of 3.02% over five years. Note that to increase returns, it is more appropriate to choose a term account that capitalizes your interest from one year to the next. They thus add to your invested capital and themselves produce interest in the following years. This is the case for example with Placement-direct.fr, but with Ramify. Therefore, please review this information carefully before subscribing.
A tax-advantaged investment, unlike Livret A
Does this mean that with rates above 3%, the best term accounts are doing better than the guaranteed savings star, Livret A? This matters because the interest on the latter is completely tax-free, while the interest generated by the term account is subject to a single flat-rate deduction (flat tax 30%, which includes 12.8% for income tax and 17.2% for social security contributions). So the gross rate shown as 3.5% is actually 2.45% excluding tax. On the other hand, with a maximum rate of 4.8% on Monabanq, you are well above the return on Livret A (3.36% vs. 3%) in one year. Let’s add that savers who are not subject to tax also win, because they only have to pay social insurance (17.2%) from the interest. Still with a gross return of 4.8%, the net reward received is closer to 4% (3.97%) for a household that does not pay income tax.
But whatever your taxation, the main advantage of this investment is that you know in advance the return on your savings, “and be able to adapt its duration to the investment horizon”, adds Gilles Belloir. All this while using high ceilings to finance larger projects.