Life insurance, as we know, is one of the French people’s favorite investments. In particular because of its tax advantages, even if these have been gradually reduced over the years. But the yield on euro funds had fallen significantly in recent years. For two years, the rise in interest rates had raised hopes of a significant increase in the remuneration of these secure vehicles. Unfortunately, the yields announced for the end of the year will probably not live up to savers’ expectations…
Before the return of inflation, triggered by the war in Ukraine and the rise in energy prices, fully secured products offered very low interest rates, which barely offset the rise in prices. Let us recall that the Livret A only yielded 0.5% before February 1, 2022… The euro funds of life insurance contracts were in almost the same boat, with an average rate of 1.1% in 2021 (compared to an average of around 3.40% in 2010).
From 2022, the returns on euro funds began to shudder with rates of up to 2% and more. An increase that did not compensate for inflation but which gave some hope to savers. Indeed, the remuneration paid in 2023 was more generous with an average rate of 2.60% and peaks of up to almost 4%.
At the start of 2024, savers stopped shunning life insurance, betting on an increase in future returns. Encouraging in the first quarter, the trend has however reversed in recent months. In particular due to the decline in inflation, energy prices and the easing recorded in interest rates. Forecasts therefore predict a stagnation in the return on euro funds. The average remuneration should not exceed that paid last year. Enough to dampen the hopes of some savers…
This bad news must however be qualified. Because in a very competitive context, nothing prevents insurers from “boosting” their rates. As we know, they can perfectly well draw on their reserves to “artificially” increase the yield of their portfolio. In other words, if the portfolio of securities of a fund yields, for example, 2.5% over the year 2024, the insurer has the technical and legal possibility of granting a bonus, for example of 0.5% or even 1%. This is the promise displayed by several life insurance contracts at the beginning of the year.
A conclusion is necessary. If life insurance can remain a preferred investment, the saver must however imperatively ensure to play the competition and to select the contracts carefully.
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