Popular savings account (LEP) at 6%, super savings accounts at 5%, Livret A frozen at 3%… With the rise in interest rates, the return on your savings is at its highest. But for how long ? The recent decision of the European Central Bank (ECB) to break a series of 10 consecutive rate increases has savers fearing that the end of recess will soon be whistled. Fortunately, to prolong the party, there is a solution: the term account (CAT), which allows you to lock in the very high level of current yields for a period ranging from one to five years.
“With a three-year term account, you are sure to keep an attractive income over this entire period, even if rates drop within six months or a year”, explains Hugo Bompard, president and founder of the Finance Héros site. The main constraint of this investment is that you must agree to immobilize part of your savings for the entire imposed period, without being able to touch them: no more payments after the initial deposit – and therefore only – and no withdrawal before the maturity (unless penalties are paid). It is this blocking of your capital which is rewarded: “In exchange for a fixed investment period, the bank guarantees you a rate fixed in advance”summarizes Souleymane Galadima, general manager of Sapians, a digital wealth management platform.
Rates “never seen” since 2008
And currently, these rates fixed at signature are very attractive: with the best term accounts, it is possible to achieve returns of between 3.5% and 4.8% per year. “Unheard of since the last great vogue for term accounts, before the 2008 crisis”, remembers Gilles Belloir, general manager of the online broker Placement-direct.fr, who has just launched a term account whose remuneration increases, typically, with your duration of commitment. Namely a rate of 3.2% for a one-year term, 3.3% per year for a CAT subscribed for two years, 3.4% over three years, 3.45% over four years and 3.5% for a 5-year maturity.
Fixed or progressive returns, depending on the offers
Like many market players, the broker has chosen a fixed-rate term account. In other words, if you opt for the 5-year maturity, for example, your savings will earn 3.5% each year for 5 years. This is also the case at Boursorama, but over a period of 12 or 18 months only: you receive 3.5% over one year, and 1.75% (i.e. a rate of 3.5% applied for half of a year) plus over six months if you commit for a year and a half.
Same principle at Distingo bank, with a fixed annual rate which also increases depending on the holding period: 3.1% for one year, 3.15% for two years, 3.2% for three years. At Ramify, the interest rate is 3.1% over one year, 3.25% over two years and 3.5% over three years.
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Alongside these annual fixed rates, you also find term accounts with progressive rates. The difference ? Your rate increases from one year to the next, so it is not fixed over the entire period. For example, at Monabanq, the holding period is imposed (5 years), with 1.6% paid in the first year, 2.3% in year two, 3% in year three, 3.4% in year four, and 4.8%, the highest rate over one year, in year five. Or an average annual rate of 3.02% over five years. Note that to boost your returns, it is preferable to choose a term account which capitalizes your interest from one year to the next. They are thus added to your invested capital and themselves produce interest in subsequent years. This is the case at Placement-direct.fr for example, but at Ramify. So be sure to check this information carefully before subscribing.
A tax-advantaged investment, unlike the Livret A
Does this mean that with rates above 3%, the best term accounts do better than the star of guaranteed savings, the Livret A? It depends, because the interests on the latter are completely tax-exempt, while those generated by a term account are subject to the single flat-rate deduction (flat tax of 30%, which includes 12.8% for income tax and 17.2% for social security contributions). Thus, a gross rate displayed at 3.5% is in reality 2.45% net of tax. On the other hand, with the maximum rate of 4.8% at Monabanq, you are well above the yield on Livret A (3.36% compared to 3%) over one year. Let us add that non-taxable savers are also winners, because they only have to pay social security contributions (17.2%) on their interest. Still with a gross yield of 4.8%, the net remuneration received is close to 4% (3.97%) for a household which does not pay income tax.
But, whatever your taxation, the advantage of this investment lies mainly in knowing in advance the return on your savings, “and to be able to adjust its duration to its investment horizon”, adds Gilles Belloir. All while benefiting from high ceilings to finance larger projects.