An estimated 134 billion euros for 2020, taking account of the impact of the new lockdown measures imposed in November, an amount never recorded since the statistical series began more than 30 years ago: this is the level of surpluses (flows excluding the capitalization of interest and excluding stock market valuation) reached by household financial investments for the year and one of the main lessons to be drawn in this area about the savings behavior of French households.
Demonstrating the cross effects of the health crisis and the so-called Pacte Law after one year, have the French changed their savings habits? Probably not. The pressure on household budgets and the prospect of a worsening financial and economic situation have combined to reinforce the high propensity of the French to save (88%) and even encouraged them to increase the amount of their precautionary savings. “The crisis has become a permanent fixture in the mental landscape of the French. Many believe that it will have a major impact on the transformation of our lifestyles,” emphasizes Eric Buffandeau, Deputy Director of Economic Research, Groupe BPCE.
Savings at unprecedented levels
Forty-three percent of the French feel that they have insufficient precautionary savings to face up to the crisis. As a result, aggregate inflows to financial investments will reach nearly 135 billion euros in 2020 compared with 71.3 billion euros in 2019, which was already an exceptionally high level since 2006 when 80 billion euros were deposited. With a doubling of inflows in the space of one year, sight deposits (an aggregate total of 66.4 billion euros from January to September) and, to a lesser extent, deposits on passbook savings accounts (especially Livret A passbook savings accounts) also reached record levels, with sight deposits alone accounting for additional inflows of more than 30.6 billion euros made between March and September 2020 compared with the average noted over the same period in 2018 and 2019. These deposits come at the expense of life insurance, which suffered from historically high levels of additional outflows of 23.1 billion euros between March and September 2020 (compared, once again, to the average observed between 2018 and 2019) and despite the continued inflow of new deposits into unit-linked policies. Net subscriptions of euro-denominated products alone could even experience unprecedented outflows of €27.9 billion in 2020 owing to the collapse in premium payments. And the strong inclination of French households for liquidity is expected to reinforce this trend, except for euro-denominated premium payments whose decline could be halted by the end of the successive lockdown measures. However, despite stock market volatility, opportunistic buying in the first half of 2020 buoyed up securities, notably equities and non-monetary mutual funds, for a total of 15.6 billion euros, with investors eager to take advantage of lower prices.
Retirement savings: a new opportunity
Preparing for retirement remains one of the principal financial concerns of the French: for 55% of French people as a whole, and 69% of those aged 35-64, it is a “major concern.” They prefer, however, to save for retirement through ‘non-specialized’ assets such as the purchase of their primary home, life insurance, or passbook savings accounts. Specialized vehicles such as individual retirement savings plans, employee savings plans, and collective savings plans are clearly less popular in their savings strategies. Despite this, in a context where households prefer to preserve the liquidity of their investments, the opening of individual pension schemes (which could reach 500,000 to 600,000 policyholders by the end of the year) represents a real success. “The so-called Pacte law, which allows flexibility in terms of product choice and immediate use, has proved its usefulness in this respect. But its very low level of public awareness (79% of French people haven’t heard of this reform) still limits its impact,” explains Alain Tourdjman, Director of Economic Research, Groupe BPCE.
The room for maneuver allowed by the intentions to subscribe to individual pension schemes (29% of active workers) and company pension plans (37% of employees not holding them) suggests that retirement savings afford significant development prospects in the medium term. The development of these products would be all the more useful to the domestic economy since the funds so collected would make it possible to better satisfy the (re)capitalization needs of French companies against a background of crisis and rising debt. Retirement savings are both an alternative to other risky investments whose share in household savings has been declining over the past decade and, in accordance with the wishes expressed by French investors, an opportunity to channel their savings towards investments that are useful both for the economy and for business organizations.