If you’ve been following French finance news, you’ve probably heard about the recent dip in the interest rate of the Livret A savings account. On February 1st, 2025, the interest rate was reduced to 2.4%, making this once-popular savings account even less appealing to savers. While the Livret A remains an easy, low-effort way to save, it no longer offers the best returns, especially as inflation continues to rise. For expats living in France or planning to relocate, it’s crucial to understand your options when it comes to saving your hard-earned money. Fortunately, there are several alternative savings options in France that are more profitable, though they come with a higher level of risk.
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What is the Livret A?
The Livret A is a tax-free savings account offered by French banks that has long been a favourite of the French population. Its primary appeal lies in its simplicity: it’s easy to open, has no fees, and provides a safe, government-backed place to park your money. However, with the recent interest rate drop, the Livret A now offer just 2.4% interest as of February 2025, down from previous higher rates. This is much lower than it has been in previous years, especially when considering inflation and other investment opportunities.
Why is the Livret A isn't enough?
The Livret A’s interest rate is designed to keep pace with inflation, but the reality is that it no longer delivers the returns many savers need, particularly those who are looking to make the most out of their savings in the long term. If you’re living in France as an expat, it’s time to start considering alternatives that may provide better returns while still offering some level of security.
Here are four profitable alternatives to the Livret A, but beware: they come with greater risk.
Euro-denominated life insurance funds
Life insurance in France offers a solid alternative to the Livret A, especially when investing in guaranteed euro-denominated funds. These funds are similar to the Livret A in that they are risk-free, and your money is protected. They are also liquid, meaning you can access your funds easily in case of an emergency. The key benefit here is that the interest rate on euro-denominated funds typically ranges between 2.5% and 3.5%, which is slightly more profitable than the Livret A’s current rate.
But here’s the kicker: When you use euro-denominated funds within life insurance policies, the interest generated each year is capitalised, meaning you earn interest on your interest. This compounding effect can significantly boost your savings over time. However, fees from traditional banks can eat into your returns, so it’s better to opt for online platforms that offer low or no fees.
For those willing to take on more risk, life insurance policies often allow you to invest in unit-linked funds. These funds can offer higher returns but also carry a risk of loss, depending on the performance of the market.
> You might be interested in this article: Navigating the French banking system
Super-accounts
Super-accounts are another option to consider. These high-yield savings accounts are offered by banks for limited periods, often when you open a new account. The interest rates on these accounts can be significantly higher than the Livret A, especially for a limited time (e.g., a few months to a year or two).
However, there are a few things to be cautious of:
- Withdrawal conditions: Some super-accounts have restrictions on withdrawals, so make sure you read the fine print before depositing your money.
- Temporary rates: The high interest rates are often promotional offers, meaning that they may drop once the promotional period ends.
For lower-income households in France, there’s another option: the Livret d’épargne populaire (LEP), which offers a 3.5% interest rate. However, it is limited to savings of just 10,000 € and is only available to people who meet certain income requirements. This makes it a great option for eligible individuals but a limited solution overall.
Real estate investment trusts (SCPI)
Real estate has always been a solid investment, but Real Estate Investment Trusts (SCPI) take it a step further by allowing you to pool your savings with other investors to collectively own rental properties. This model allows you to receive a share of the rental income generated by those properties, which can be quite profitable.
However, real estate markets can be volatile, and SCPI investments are not risk-free. There are no guarantees that you will get back the full amount you invested, especially if the real estate market takes a downturn. On the plus side, returns on SCPI investments generally range from 6% to 7.5% per year, which is far superior to the Livret A.
Bear in mind that liquidity is not guaranteed with SCPI investments, meaning you might not be able to access your funds quickly, unlike the Livret A or euro-denominated life insurance funds.
> You might be interested in this article: Investing in a ski property in France
PEA (Plan d'Épargne en Actions)
If you’re willing to accept significant risk for the potential of higher returns, consider investing through a PEA (Plan d’Épargne en Actions). This is essentially a tax-advantaged investment account designed for long-term investors who are looking to buy stocks, Exchange-Traded Funds (ETFs), or other equity-based investments.
The PEA allows you to invest in European companies, and over the past decade, strong European companies have provided annual returns of around 8%. While this can be a profitable strategy in the long run, the risk of significant losses is very real. Stock market investments are volatile, and there are no guarantees of profit.
The advantage of the PEA is that it offers passive management (e.g., ETFs), which allows you to invest in a diversified portfolio of stocks without having to actively manage it. This can be ideal for people who are comfortable with risk and have a long-term investment horizon.
Final notes
While the Livret A is still a simple, tax-free way to save, it’s no longer the most profitable option for expats living in France. With the recent reduction in interest rates, it’s essential to explore alternative savings and investment options to make the most of your money.
If you’re comfortable with taking on a little more risk, options like euro-denominated life insurance funds, super-accounts, SCPI investments, and PEA can offer significantly higher returns. However, always remember that with higher potential returns comes higher risk, so carefully assess your financial situation, risk tolerance, and investment goals before making any decisions.
