France’s LEP tax-free savings account at 2.2% interest: Who qualifies?

Reader question: What is a Livret d’épargne populaire savings account and who can open one?

The interest rate on France’s Livret d’épargne populaire (LEP) savings account rose from 1% to 2.2% on February 1. This means the rate is now more than double that of the popular Livret A savings account, which increased from 0.5% to 1%.

Both LEPs and Livret A accounts are special bank accounts in France that are regulated and are not subject to tax or social charges or fees.

There are, though, limits of the amounts that can be held in these accounts - only €7,700 can be deposited into an LEP and €22,950 into a Livret A.

LEP interest rates are calculated either based on inflation (excluding tobacco) or on the Livret A rate plus 0.5%, whichever is higher.

The rise means that a person with €5,600 in an LEP – the average balance for these accounts – would receive €123 net per year in interest, while the same amount in a Livret A would bring in €56.

Most ordinary, taxable, savings accounts are currently offering interest rates as low as 0.09% gross, according to Banque de France figures.

Who can have an LEP?

You must be a tax resident of France in order to open an LEP, while Livret A accounts are also open to non-residents. Only one such account is allowed per person (inclusive of all banks you may have accounts with).

In addition, while people of any age can open a Livret A, you must be an adult and no longer a part of your parents’ foyer fiscal (tax household) to have an LEP.

LEPs also have income thresholds for access. These are based on a person’s revenu fiscal de référence, a figure, roughly corresponding to net taxable income, which is used to determine whether a household is eligible for certain benefits.

The ceilings depend on the size of the family.

For example, a single person living alone who wishes to open an LEP in 2022 would need to have a revenu fiscal de référence (as shown on their last avis d’imposition income tax statement) of less than €20,296. For a couple it is €31,135.

Why are people missing out?

The Banque de France estimates that around 26 million people – half of all adults in France – are eligible for an LEP, but only seven million actually have one, around 13% of those who qualified as of 2020. The figures for 2021 have not yet been published.

“LEPs are aimed at a population which may have a complex relationship with financial institutions and which may be less connected, less informed,” Philippe Crevel, founder of think-tank Cercle de l’épargne told Le Monde.

An education campaign is set to begin in the spring to encourage eligible people to take advantage of this type of savings account, with emails being sent out with further information “in the coming days.”

La Banque postale has reported that “subscriptions are rising again so far in 2022, thanks mainly to the automation of the eligibility verification process.”

This enables banks to obtain the necessary information on the financial situation of customers, helping to confirm whether or not they qualify for the account.

The LEPs new interest rate will also help to make it more popular, said Cyril Blesson, the founder of Cahiers de l’épargne advice service.

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