Home savings programs

Introduction

The Home Savings Program ("épargne-logement"), created in 1965, consists in 2 steps. On completion of an initial saving period, during which a saver makes deposits into his Home Savings Account ("compte d'épargne-logement" or "CEL") or his Home Savings Plan ("prêt d'épargne-logement" or "PEL"), that same saver is then entitled to apply for a special regulated housing loan ("prêt d'épargne-logement").

Such loans enjoy advantageous interest rates preset by contract and are granted to individuals in order to finance the purchase of a property and/or carry out renovation work on a property. In some cases, the French State supplements the loan with a special Top-Up paid by the French government ("prime d'État"). The saver must commit to use the saved funds to finance the property for which the loan is granted.

The Home Savings Account (CEL) is flexible: the saver is free to deposit and withdraw funds, subject however to respecting the minimum amount fixed by government order. A CEL can be kept open and used as a savings vehicle for as long as the saver wishes.

The Home Savings Plan (PEL) offers a better saving rate and a higher deposit ceiling, but is less flexible : the saver commits to depositing a certain amount of money on a regular basis and this money remains blocked on the account for a certain time. Another difference, with respect to the CEL, is that a PEL has a limited lifetime.

Only individuals (i.e. no legal persons) are entitled to open a CEL/PEL. Underage children are entitled to have a CEL/PEL, in which case the payments are made by the child's parents (or a third party) with the saved funds accruing to the child.
A given individual can only have one single PEL or CEL, but a given person can have both a PEL and a CEL. No requirements as regards nationality or place of residence apply.

The Home Savings regime is applicable in mainland France and in French overseas territories, including Mayotte, Saint Pierre and Miquelon, New Caledonia and French Polynesia.

Since 1 January 2014, the regulatory monitoring and collection of statistics in relation to the PEL/CEL, as well as the verification of operations related to this program, have been entrusted to SGFGAS.

Phase 1: Saving period

A Home Savings Book can be dematerialized; however, a written contract must be signed by a representative of the banking establishment where the funds will be deposited and by the future saver, specifying the rights and obligations of both parties. This contract must be kept by the banking establishment.

Deposits

In order to make sure that the program fulfills its stated purpose as a vehicle to ensure regular savings, both the CEL and the PEL impose a number of rules as regards the initial deposit and subsequent deposits.

A CEL can be kept open as long as the saver wishes, and funds can be withdrawn from a CEL, subject however to keeping at least €300 on the account.
A PEL has a duration of between 4 to 10 year. Once this time has expired, the saver can no longer deposit funds on the PEL, but funds already deposited continue to be remunerated at the contractual agreed rate for an additional period of 5 years.

Duration

A CEL can be kept open as long as the saver wishes, and funds can be withdrawn from a CEL, subject however to keeping at least €300 on the account.
A PEL has a duration of between 4 to 10 year. Once this time has expired, the saver can no longer deposit funds on the PEL, but funds already deposited continue to be remunerated at the contractual agreed rate for an additional period of 5 years.

Interest rate paid on funds deposited

The interest rate paid for the CEL automatically tracks the interest rate paid to holders for the "Livret A" savings book, doing so as follows: excluding the Top-Up paid by the State, the rate of interest paid on a CEL is equal to 66% of the rate paid for the "Livret A" savings book, rounded up to the nearest quarter point (or failing this, to the next highest quarter-point), which has been 0.75% since 1 August 2013. Taxation is reduced: hat social contributions are deducted on interest generated, but otherwise the interest is income tax free.

In the case of a PEL, interest is generated at the rate set by the government on the date of signature of the subscription contract. This rate remains unchanged for the entire duration of the plan. It is now 1.5 %.

Phase 2: using the funds (property loan and Government Top-Up)

On completion of the initial period (i.e., saving the funds), the holder of a CEL or a PEL is entitled to a property loan, along with a special Top-Up paid by the French government.

The rules for the Government Top-Up as well as properties eligible for the program have evolved over time, most recently in 2011 for Home Savings Plans and Accounts opened as of 1 March 2011. The following sections concern only such operations.

Eligible property: the property purchased must be a main residence (new or existing property, purchase and/or renovation works). The loan can however be used to purchase shares issued by property investment companies ("SCPI").

Loan amount: The loan granted on the basis of a CEL/PEL depends on the age of the Account/Plan, as well as on the interest rates. Specifically, the loan amount and duration are calculated in such a way that the total interest amounts to be paid back by the borrower are equal to the total interest generated (via the CEL or PEL) and used to calculate the loan, the preceding multiplied by an interest-conversion coefficient at least equal to 1. As regards the CEL, the maximum interest-conversion coefficient is 1.5 in the case of standard property loans, and 1.0 in the case of loans intended to purchase shares issued by property investment companies. As regards the PEL, the maximum interest-conversion coefficient is 2.5 for standard property loans, and 1.5 in the case of loans intended to purchase shares issued by property investment companies.

The maximum loan amount to which the borrower is entitled is €23,000 in the case of a CEL, and €92,000 in the case of a PEL. If a given person has a CEL and a PEL, the maximum loan amount remains at €92,000. These amounts are set with respect to the holder of the Account/Plan, which means that, in most cases, a married couple is entitled to a loan of up to €184,000.

Loan terms: the loan duration is between 2 and 15 years.

The rate of interest depends on the rate used to calculate interest generated during the saving phase, to which a margin is added, as follows:

CEL: when calculating the loan entitlements associated with interest accrued by the saver as from 1 August 2013, the interest rate charged on loans is 2.25% (i.e. 0.75% corresponding to the rate of remuneration of the CEL plus 1.5% in administration and financial costs);
For PEL plans opened from 1 August 2003 to 31 January 2015, the rate of interest charged on loans is 4.20% (i.e. 2.50% corresponding to the rate of remuneration of the PEL plus 1.7% in administration and financial costs). For PEL plans opened as of 1 February 2015, the rate of interest charged on loans is 3.20%. For 2016 plans, the max rate is 2.7 %.

Top-Up paid by the French Government to savers

If a PEL or CEL saver closes his account (having respected the applicable rules) or takes out a loan based on his PEL/CEL, he receives a special Top-Up from the French government. The amount of this Top-Up depends on the amount saved, and is calculated using rules which have varied over time. The Top-Up is paid by an institution chosen by the government (currently the Crédit Foncier de France).

Determining the Top-Up for a CEL: the Top-Up is only paid if the holder of the CEL actually requests a Home Savings Loan. The Top-Up depends on the interest accrued during the lifetime of the CEL. Thus, for Top-Up entitlements generated as of 16 February 1994, the amount of the Top-Up is equal to a fraction of the interest accrued on the date on which the loan is requested and taken into account to calculate this loan. The exact value of this fraction is determined by means of a ministerial order, in a uniform manner for all CEL accounts, regardless of when they were opened. Specifically, this fraction is 5/9 for interest accrued between 16 February 1994 and 15 June 1998, and this fraction is 1/2 for interest accrued as of 16 June 1998. The maximum Top-Up is €1144 per loan operation.

Determining the Top-Up for a PEL: the holder of the PEL is entitled to a Top-Up paid by the State, assuming that the saver respected the clauses set forth in the savings contract. The conditions under which this Top-Up is paid depend on the opening date of the Home Savings Plan, as follows:

For PEL plans opened before 12 December 2002, the Top-Up is paid by the State upon closing the PEL (i.e., withdrawing the funds). This Top-Up is paid regardless of whether or not the holder actually took out a Home Purchase Loan and regardless of whether or not the holder transferred his entitlements under the PEL;
For PEL plans opened between 12 December 2002 and 28 February 2011, the holder is only entitled to receive the Top-Up if he does actually take out a Home Purchase Loan;
For PEL plans opened as of 1 March 2011, the Top-Up is only paid if the holder takes out a Home Purchase Loan of at least €5000.

For PEL plans opened from 1 March 2011 to 31 January 2015, the Top-Up is equal to 2/5 of the accrued interest, up to a maximum of €1525 (whereby this can be adjusted upwards depending on the family dependency situation).

For PEL plans opened as of 1 February 2015, the Top-Up is equal to half of the accrued interest, up to a maximum of €1525 (whereby this can be adjusted upwards depending on the family dependency situation).