“What to do with an old PEL when you don’t want to borrow?”

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– What is the point of keeping an old PEL?

Josseline, a reader, sent us the following question: “Hello, my partner and I are over 70 years old. We have each had a life insurance contract with our insurer for 30 years. Our Livrets A and Livrets de développement durable et solidaire (LDDS) are at the ceiling. We also each have a Housing savings plan (PEL) for over 20 years. But we do not intend to use the proposed loan. What do you advise us to do with these?”

Hello Josseline, and thank you for your question, which allows us to return to the case of these old PELs that many French people still count among their savings products. According to the Bank of France, 11% of PELs are currently over 20 years oldwhich represents around 1 million plans out of the 10 million still open today. But compared to their more recent versions, the old PELs have two major advantages.

An investment that has lost its luster over the past 20 years

First, their remuneration, which, in the case of PELs, is known at the time of subscription and does not change thereafter. In fact, before the start of the 2000s, the interest rate on these products was much more advantageous than today. Depending on the year of subscription, the remuneration of PELs opened before 2003 could thus increase up to 6.3% for the luckiest. Then, unlike the PELs opened since 2018, these old plans do not have an expiration date. This limit is now 15 years, after which the PEL is transformed into a classic savings account.

In your case Josseline, with a PEL which was opened before March 1, 2011, the advantage is even more significant, since as the service-public.fr site points out, you can certainly no longer make payments to your PEL, but the latter “continues to produce interest at the rate set in the contract, for an unlimited period». In other words, your PEL will continue to earn you an advantageous rate until you decide to withdraw the invested capital, which will then result in its closure.

Keeping your old PEL is an option to combine security and performance

Given that your other regulated booklets are already at the ceiling, “you will not get better than your current PEL to ensure both safety and such a level of performance”points out Mathilde Carrier, heritage consultant in Nîmes. The option of keeping your old PEL is therefore rather wise. But if, however, you wish to exit and turn to another investment, you can, for example, transfer the funds to life insurance that you already have. By betting, for example, on guaranteed capital supports – euro funds -, you ensure that you do not lose any of your savings, while currently benefiting from attractive remuneration conditions.

What’s more, life insurance is also more advantageous than PEL if you wish to pass on your capital. “Payments made after age 70 are certainly less attractive than if they are made beforerecalls Mathilde Carrier. However, after this age, the premiums paid still allow you to pass on to your beneficiaries up to 30,500 euros tax-free.” Another solution is investing in a real estate investment company (SCPI) via your life insurance or directly with a management company. An option which presents a risk of capital loss, but which can allow you to obtain a return higher than inflation and a regular income supplement.

Finally, don’t forget that since 2018, the interest on PELs has been taxed in the event of exit. However, plans opened before 2011 also benefit from an advantage, since only interest generated from the 13th year is subject to income tax. As for social security contributions (17.2%), they are collected every year from the 11th year.

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