The housing savings plan ( PEL ) is a French home savings product . Like the home savings account , after a savings phase, the owner can obtain a home savings loan .
This savings system gives access at a later time to a loan at a more or less privileged rate to help purchase a home for the principal habitat of the person concerned or his family.
Characteristics of the home savings plan
- One plan per person, major or minor 1 .
- Minimum payment: 225 € at the opening.
- Minimum annual payment: € 540 (minimum payment required, with a minimum payment of € 270 per semester or € 45 per month) 1 . If, for any reason, the payments are not made as defined in the contract, the plan is deposited and no further payment will be made on it.
- Ceiling of deposits: € 61,200 (excluding capitalization of interest) 1 .
- Pay rates: the rate fell to 1% gross 1 st August 2016. This remuneration was previously 1.5% gross. The opening rate of the ELP is increased by a State bonus acquired in case of realization of a home savings loan. For an ELP opened on 1 st March 2011, the premium is paid only if the plan holder signed a mortgage € 5,000 minimum. In addition, it is capped at € 1,000, or € 1,525 if the ELP is used to purchase a property that meets sustainable development standards, plus an increase of € 100 or € 153 per dependent.
- Calculation of interests: two methods of calculation exist according to the banking establishments. Interest can be calculated from day to day, or by fortnight.
- Taxation: Interest is exempt from income tax during the first twelve years of the plan. Beyond 12 years, the interest is either taxed at the progressive rate of income tax or subject to the flat-rate discharge. Social security contributions are payable each year.
- Loan rate: if a loan is actually granted, the rate applied is the rate defined at the time of the subscription. As the ELP is contractual, the rate applied to the loan is known in advance.
- Minimum duration: 4 years (a closing before 4 years leads to penalties) 1 .
- Maximum duration: open ELPs until have no time limit; starting thethe new ELPs have a maximum duration of 15 years beyond which the plan is converted into a passbook. Payments are possible until the tenth year of the ELP and within the ceiling 1 .
Only certain approved financial institutions such as banks and savings banks are allowed to market the ELP.
Phase of use of funds
The interest rate of the loan can be favorable (thanks in particular to an interest subsidy by the public authorities) and its amount and duration depend on the previous saving effort on the plan. Most of the time it is accompanied by a bank loan under normal conditions. The interest of contracting this loan depends on the period when the demand is made, if the banks practice rates higher than that of the ELP then it becomes interesting to use it. In the opposite case, there is no housing savings loan, but the capital of the ELP is included in the contribution.
In addition, the portion accumulated in capital and interest for savings is recovered by the saver and used as a personal contribution during the purchase. Note that the saver has the right to recover his funds without borrowing or making a real estate purchase. In this case, the State premium will not be awarded for plans opened after December 12, 2002 (this premium represents 1% interest on the overall plan rate and is capped at € 1,525 or € 1,000depending on the case). It remains allocated for plans opened before December 12, 2002.
This is money brought in by new savers that is supposed to finance the borrowers, much like a tontine . The fact that some savers do not use the borrowing option facilitates the balance of the system and avoids sinking into a ” pyramid scheme “, although some imbalances between the rate of outstanding loans (and to be granted) and the savings rate that finances them can appear in the event of a sharp rise in rates.
Only one ELP can be opened per person. In the case of holding an ELP or CEL , the opening of an LEC or ELP must take place in the same institution. The opening of an ELP is free. Any natural person, even minor or foreign, can open an ELP.
Obtaining the home savings loan is not automatic. Where applicable, this is a fixed rate, fixed monthly loan.
The borrowing rate is equal to the ELP premium rate (see table below) plus 1.7% until 31/01/2015, plus 1.2% since. For example, for open ELPs since, the (fixed) borrowing rate is 4.2% whereas for the ELPs opened as of 1 February 2015, the rate is 3.2%. The amount borrowed remains limited to € 92,000 maximum.
The loan must be for the exclusive purpose of:
- a dwelling located in France;
- shares in a SCPI (civil real estate investment company).
Main loans authorized:
- acquisition, construction, improvement or extension of the principal residence;
- construction or acquisition of a new secondary residence.
Open plans since favor the real estate investment of the principal residence and only loans attached to a principal residence (of the borrower or his tenant) are authorized 2 .
The amount of the loan granted depends on the interest earned (apart from the state premium) during the savings phase. Multiply this total by 2.5 (1.5 if the loan is used to purchase shares of REITs) and then, depending on the duration chosen, look for the amount of the loan, the cost of interest at the rate of interest. savings (still excluding state premium) will correspond to this total 3 .
For example, a PEL subscribed in 2002 (savings rate 3.27%, borrowing rate 4.97%) with monthly payments of € 500 for 4 years produces € 1,580 of interest. It will therefore be possible to take out a loan at the loan rate, the cost of which must not exceed 1580 × 2.5 = € 3,950 . For example, for a loan over 10 years, just over € 15,000 .
Remuneration of funds paid
The total remuneration includes on the one hand the interest paid by the financial institution (5/7 of the overall rate) and on the other hand, the premium paid by the State (2/7 of the overall rate, within the limit of 1 525 € ). This remuneration is determined according to the date of subscription of the ELP:
|PEL subscribes||Off-premium pay from the state||Compensation|
|1 st August 2016||1%||1,5%|
|1 st February 2016||July 31, 2016||1,5%||2.25%|
|1 st February 2015||January 31, 2016||2%||3%|
|1 st August 2003||January 31, 2015||2.5%||3.5%|
|1 st July 2000||July 31, 2003||3.27%||4.5%|
|July 26, 1999||June 30, 2000||2.61%||3.6%|
|June 9, 1998||July 25, 1999||2.9%||4%|
|January 23, 1997||June 8, 1998||3.1%||4.25%|
|February 7, 1994||January 22, 1997||3.84%||5.25%|
|May 16, 1986||February 6, 1994||4.62%||6%|
|1 st July 1985||May 15, 1986||4.75%||7.5%|
The state bonus is calculated per full year: it is therefore advisable to terminate immediately after the anniversary date.
When opening an amount of 225 € minimum is required. Payments can then be made as desired provided they provide a minimum of € 540 per year. The payment ceiling is € 61,200 (excluding capitalized interest). Beyond 10 years, it becomes impossible to make payments, the plan may not be closed and thus continues to produce interest. The ELPs opened sincemust be closed once the 15 th reached year.
Any withdrawal results in termination of the plan, so it is not possible to make partial withdrawals. it is necessary to distinguish three cases:
- between 0 and 2 years old: the withdrawal entails the loss of acquired rights and the State bonus. Furthermore compensation funds deposited will be that the current contractual rate of CEL (or 0.5% from the 1 st August 2015);
- between 2 and 3 years: the withdrawal entails the loss of the acquired rights and the State bonus. The remuneration of funds deposited will however well that the current contractual rate of PEL (1% since 1 st August 2016);
- between 3 and 4 years old: the rights and interests acquired at the end of the third year are retained. On the other hand, the perceived State premium is reduced by half (this fraction of the premium being granted on condition of obtaining the loan for the ELPs subscribed since).
Any withdrawal results in the calculation and withholding of social security contributions (15.5%) on the interest generated since the opening.
From the tenth year of the plan, these deductions are deducted each year from the interest paid and are thus deducted during the closing only on the interests of the last year.
Beginning in grade 12, interest is also taxed annually on the income tax schedule (or PFL 24%).
Duration and Closing
- The basic theoretical duration of the plan is 4 years, because it is from this time that it allows to borrow in good conditions (100% of the state premium).
- Beyond 4 years the plan can be extended without limitation of duration and up to 10 years, the operating conditions are identical.
- From age 10, it is no longer possible to make payments on the plan, however the capital acquired continues to generate interest for five years at the prevailing rate, without premium.
- After 15 years, the ELP is automatically converted into a classic bank savings booklet. This is not true for open ELPs before which have an unlimited duration.
Assignment of rights
Acquired rights may be assigned to a person in his family (except cousins, cohabiting partner and “pacsé” partner). The assignment of rights does not of course mean the transfer of capital. Different cases arise:
- The transferor has been in possession of an ELP for at least 3 years: the transferee must also hold an ELP for at least 3 years.
- The transferor has held an LEC for at least 12 months: The beneficiary must hold:
- an ELP for at least 3 years
- a CEL for 18 months at least
- The transferor holds a CEL for at least 18 months. The beneficiary must hold:
- an ELP for at least 3 years
- a CEL for at least 12 months.
The subscriber may request the transfer of his ELP to another bank, provided he has the agreement of the host bank and the receiving bank. These transfers may result in fees.
All pledging is prohibited.
Following the Senate’s examination of the draft Finance Act of 2006, the decision to eliminate tax exemption for ELPs over the age of 12 has been taken. These savings products have since been subject to a withholding tax in the same way as other investment products.
Senator UMP of the Oise Philippe Marini , general rapporteur, is at the origin of this amendment and supports his proposal by highlighting the fact that the real investment rate of ELPs in real estate had dropped to 6.7 % in 2004 and that there was no need to “encourage tax-free savings without risk”. The Minister for the Budget recalled that ELPs “have a contractual term of ten years” and said that “modest people” who choose to integrate the interest of their ELP with their income “will not be taxable”. It estimated the impact of this measure on the state budget at 200 million euros.
As of 2006, the levying of social contributions on ELP interest of more than 10 years (15.5%) comes early rather than after the closure of the plan. After the tenth year the withholding of social security can be important: the CSGand the CRDS must be paid not only for the interest of the current year but also for the interest paid on previous years. Moreover, beyond 12 years, ELPs are now subject to the progressive income tax schedule as well as to a 24% deduction of income tax deducted at source.
Withholding [ change | change the code ]
As of January 1, 2018, the taxation of the ELP is as follows: Gross: 100%
- Generalized social contribution (CSG): 9.10%
- Solidarity contribution: 0.33%
- Solidarity levy: 2.22%
- Social levy: 5.00%
- Repayment of the social debt (SDR): 0,55%
Total 2018 contributions: 17.2% (maximum 17.199% if each tax is rounded down to the nearest cent)
As of 1 January 2017, the taxation of the ELP was as follows: Gross: 100%
- Generalized social contribution (CSG): 8.20%
- Solidarity contribution: 0.30%
- Solidarity levy: 2.00%
- Social levy: 4.50%
- Repayment of social debt (SDR): 0.50%
Total 2017 contributions: 15.5% (maximum 15.499% if each tax is rounded down to the nearest cent)
Income Tax Return (pre-filled)
In addition, interest is net taxable, that is to say subject to income tax. Deposits guaranteed 100% by the French Deposit Guarantee and Resolution Fund .
Example PEL opened between 2000 and 2003:
- Gross remuneration excluding bonus: 3.27%
- Gross taxable premium excluding premium: 3.10% (3.27 – 5.20%)
- Taxable net remuneration excluding bonus: 2.62% (ie 3.10 – 15.5%)
- Net after-tax premium after average tax (average 14%): 2.25% (2.62 – 14%)
- As a comparison net remuneration after tax (not taxed) of Livret A: 0.75%
The weight of the tax on the old ELP is 5.20% + 15.5% + 14% (for the average tranche), or 34.7%, but it remains much more interesting than the Livret A, with same guarantees. However, the Livret A does not increase the reference tax income (RFR) which reduces the entitlement to benefits.
Example PEL opened after 1 August 2016:
- Gross remuneration excluding bonus: 1.00%
- Gross taxable premium excluding premium: 0.948% (1.0 – 5.20%)
- Taxable net remuneration excluding premiums: 0.80% (ie 0.948 – 15.5%)
- Net remuneration excluding the average after-tax premium (average tranche 14%): 0.688% (ie 0.80 – 14%)
- As a comparison net remuneration after tax (not taxed) of Livret A: 0.75%
The weight of the tax on the recent ELP (opened after 1 August 2016) is 5.20% + 15.5% + 14% (for the average tranche), or 34.7%, which means that it is much less interesting than a Livret A, in addition to increasing the reference tax income (RFR) which reduces the right to benefits. Its only advantage is forward-looking, if one believes that in a decade (years 2026 and following) its Livret A rate will be even lower, or that the currency will have been deflated. But in this belief it may be wise to spend your money rather than save it.
- 0 – 10 years = social security contributions on interest generated since the plan was opened, taken once in the tenth year or at the end of the plan for ELPs purchased before . Levy each year, and at the close for the current year for ELPs opened since.
- From age 10 = social security contributions taken each year on interest.
- From age 12 = Social security contributions and taxation on the income tax scale taken each year on interest.
Notes and references
- ↑ a , b , c , d and e ” savings: housing savings plan (PEL) ” [ archive ] , (accessed January 16, 2015 ) .
- ↑ See https://www.tresor.economie.gouv.fr/4013_plan-depargne-logement-les-principaux-reperes [ archive ] and http://www.cbanque.com/credit/pretpel.php [ archive ] .
- ↑ Ready Home Savings [Credit Calculation] [ archive ]