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Tax Free Bank Savings Still Make Sense

Rates in tax free bank savings accounts have been reduced recently, but such accounts are still worth holding.

In the search for somewhere to park your cash the use of tax free bank saving schemes continues to remain an indispensable simple and risk free option for savers.

The three main schemes that are tax free are Livret A, Livret de Développement Durable (LDD) and Livret d'épargne populaire (LEP)

Since 1st February the rates on these schemes have been reduced down 0.5% to 1.75% for the Livret A and LDD, and to 2.25% for the LEP.

However, the total amount that can be deposited on a Livret A has been substantially increased this year to €22,950 per person (excluding interest). Prior to Oct 2012 the maximum amount that could be held in this account was €15,000.

You can hold €12,000 in the LDD and €7,700 in the LEP.

As the other two accounts can be held simultaneously with the Livret A this means that the total sum that can be deposited on tax free savings accounts is €42,650 per person, subject to eligibility.

So for a couple that means you can deposit and hold €85,300 on these accounts, plus accrued interest. Interest is calculated every 15 days and is completely free of income tax and social charges. The sums held on the accounts are also immediately accessible.

For some, the only potential grit in the scallop is that eligibility to the LEP is subject to you paying no more than €769 a year in income tax in France. That is actually an attainable target for many expats, as the income tax system in France is quite generous, particularly at low to moderate incomes.

If you have children it is also possible to add another tax free savings account to this total - the Livret Jeune. However, this young persons (12-25) savings account is subject to a maximum initial deposit of €1,600, although it does offer an attractive savings rate of around 3.5%.

The rates of these tax free savings accounts are reviewed twice a year (15 July and 15 January) and the rates determined by the government on the basis of advice from the Bank of France.

The rates are adjusted in line with inflation.

All banks in France offer the tax free savings accounts. There is no residence requirement to hold a Livret A account, although that is not the case with the LDD and LEP, which both require that you are resident in France.

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This article was featured in our Newsletter dated 05/02/2013

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