How many of you have some savings accounts in their French bank without knowing what they are, how much they earn or how they work? Come on! Not a week passes without me meeting people who do not have a clue, sometimes, not even knowing how many accounts they have in their bank. “Well, the girl at the bank did lots of drawings explaining it and we gave up as she was very nice!!” Of course, she has left since then and her replacement does not speak English and is not so nice so you don’t dare ask!!
My lovely English husband (at the time of writing this article the rugby world cup has not started yet and we still speak to each other!) always says: “they are two things I want to be sure I understand in France: health and money.”
So let’s have a look at one account in particular that most banks will try to sell on to you (and probably have from my experience!) The PEL!
What is PEL: It is a savings account that is earning 2% per year BEFORE social charges (since 01/02/2015, 2.5% before that date). It was created by the French Government to encourage people to save money towards buying a main residence hence the name “Housing Saving plan”.
Everybody can open one (even below 18 years old) and the idea was that people who had a PEL could obtain a mortgage via PEL and get a bonus from the government (up to 5000 euro depending on how much is on the PEL). I am yet to meet anybody who has benefited from this bonus! One, because the interest on mortgages via PEL are higher than normal mortgages and two, because the condition to get it are weird (the house you buy must meet environmental criteria) and is complicated to set up!
How does it work: To open it, you must make an initial deposit of 225 euro accompanied with installment of 540 euro per year minimum for the first 4 years (done monthly, quarterly or bi-annual). You can do additional deposits whenever you want before the 10th anniversary of the PEL.
The maximal amount in it is 61200 euro but compounding interest can make it grow past this figure.
You are only allowed one per person.
After 15 years, it will not be earning 2% anymore and the banks decide on how much it will be earning. You can shut it anytime you want and if you shut it in the first 2 years, you will only get 0.5% interest instead of 2%.
You can NOT MAKE PARTIAL WITHDRAWAL. If you need money, you have to shut it.
Tax implication: Social charges are taken off it on the 31st of December each year (same time they give you the interest) and at the moment it is 15.5%. No income tax for the first 12years. After 12 years, the interest is to be declared on your income tax every year.
Advantages: Well, it is forcing you to save money and it is earning more than the regulated accounts /ISA (LEP, Livret A and LDD-see my previous article on BH-assurances web site) which are only earning 0.75% (1% for LEP) since 01/08/2015!!
Disadvantages: It’s only earning 1.69% (2%-15.5% social charges). You cannot make partial withdrawals. You get penalised for shutting it within the first 2 years. You are obliged to put money in it in the first 4 years. You are pretty much obliged to shut it after 12 years for tax reasons or 15 years because it won’t be earning anymore.
When you die, it will be dealt with by the notaire like any other bank accounts or properties and there could be inheritance tax on it
And last but not least the bank charges your heirs for shutting it down (free if you shut it while you are alive). The charge is a % of how much is on the PEL at the time of the death.
Conclusion: I think you might have gathered from my article that I am not a fan of this saving account!! In fact I don’t have one AND NEVER WILL! I have a Livret A for treasury (in case my husband breaks the TV watching France beat England in rugby!) and an Assurance vie for longer term saving (well it could be for my retirement if it ever comes or my dream Maldives holiday in 2 years!!!).
Please don’t take this wrong as I know most of my readers are past 40! But in my view, this account is only good for young people in their 20ies or 30ies who can only save 50 euro per month in the next 5 to 10 years because if the savings account was available or they were not obliged to save into it (first 4 years), they would have a tendency to spend it.
Chances are you probably have a PEL without knowing it as banks use funny names such as “carré vert or blue” or “Moisson” or “Capital Expension”, etc. so check your paperwork and contact me if you want to find a more flexible and tax advantageous saving account.
Remember to check out our web site www.bh-assurances.fr for all my previous articles (“practical information” on the English site). We also now have a new section in it with a listing of English speaking traders.
And we now have a Facebook page: Allianz Jacques Boulesteix et Thierry Hatesse
And don’t hesitate to contact me for any other information or quote on subject such as Funeral cover, inheritance law, car, house and top up health insurance, etc…
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