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The French and their investments

The eyes of the world were once again riveted on Hanoi this morning. The Vietnamese city was the venue of the unlikely summit between Donald Trump and Kim Jong-un, where, amid a welter of flags, the US president referred to the North Korean chief as “a great leader”.  Ultimately, no deal was ironed out, with both countries seeking more time to address their divergences, the strongest of which are the denuclearisation of the Korean peninsula and the lifting of sanctions against the Communist regime.


Deals are decidedly hard to seal at the moment, whether on Brexit, the US-Chinese trade war or GAFA taxation in Europe. So the French press has naturally shifted its focus to the everyday life of the French population, and in particular their investments and, thus, their money. Under the headline “Life insurance is losing money for the French”, a journalist in Thursday’s Le Figaro wrote: “According to the CLCV*, the remuneration of funds in euros is much too low to protect savings against inflation. The consumer protection organisation is calling on insurers to do something about it.”


The article continues: “Will life insurance remain popular in France for long? Nothing is less sure, or so says the CLCV. In a study published on Thursday, the organisation writes that this type of investment is now losing money for savers. At least in its most common guise of euro-denominated funds. According to the CLCV, which analysed policies with over €10 billion in assets under management, the average remuneration rate in 2018 was 1.7%, compared with an inflation rate of 1.8%. This means that the purchasing power of savers has decreased. In addition, this savings category is subject to social levies of 17.2%. ‘A yield of around 2.18% was necessary in 2018 to safeguard purchasing power from savings,’ said François Carlier, general delegate of the CLCV.”


Le Figaro then goes on to write: “The feebleness of returns on life insurance policies can be attributed to interest rates, which remain at a very low level. But according to the CLCV, insurers had the means to better safeguard the savings of their customers, in the shape of a nest egg called a profit-sharing reserve, composed in part of the annual profits  of euro-denominated funds. Currently totalling some €50 billion, this reserve can be used to provide savers with higher remuneration in periods of low interest rates. Some insurers have played the game, but not sufficiently, says the organisation.”


The French and their finances is a hot topic at a time when hopes for brisk growth mainly lie in the population’s capacity to consume, i.e. their purchasing power. Obviously, life insurance remains highly popular in France, as confirmed by François Carlier speaking on RTL radio on Thursday: “When you ask insurers, they say, ‘In tough times you can count on us and we’ll be there’. Well, 2018 seemed difficult enough to us, what with the high rate of inflation. So they should have made an effort on returns […] You ask yourself sometimes what they will do with this money. It’s a legitimate question and we will be calling on professionals and regulatory authorities to shed light on the matter.”


The population is asking a number of big questions in 2019. What should we expect with pensions? How to supplement your pension without being overly taxed? What’s the best choice between index-linked funds or active managers? What is the future of participative finance? Can the stock markets still make a comeback? This column will be fully “invested” in these issues in the coming weeks…


Christian Moguérou


* Consommation Logement Cadre de vie, a consumer organisation in France.

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