4th February 2014
The energy minister Greg Barker has declared that installing solar panels to your roof is a better investment than a pension according to a report in The Telegraph writes Philip Scott.
According to the story, Barker, said that anyone approaching retirement should consider putting some of their savings into solar panels because they would deliver a better financial return than a pension.
He said that 500,000 British homes have installed solar panels, which allow users to generate their own electricity and sell any excess power to energy firms.
While they can be expensive to install, the savings on bills and the ability to sell power can mean cash can be made in the long run. Currently the government guarantees the fee which users can sell their excess electricity, although the rate has been reduced.
The report states that Barker said that those planning for retirement should think about putting some money into solar panels instead of a traditional pension.
“Solar is a really attractive financial proposition,” the minister told The Daily Telegraph. “You get a guaranteed tariff for 20 years and if your panel is well-sited, it could yield 8% or more. That is more than an annuity, particularly if you are in your 50s or early 60s.”
He added: “Anyone considering retiring should seriously consider whether solar panels are right for them, because in some circumstances, they will get a higher return than from putting the money into an annuity.”
On the minister’s point Laith Khalaf, head of corporate research at Hargreaves Landsdown argues that while solar panels may have their merits, they are no substitute for a pension in retirement planning.
Khalaf says: “A pension is the most effective way to save for retirement because it typically comes with an employer contribution, and gets tax relief from the government. The pension is guaranteed for life once you draw it, even if you live to 100, which an increasing number of people are finding is a reality rather than a pipe dream.”
For each £100 you put in to a pension, you can typically expect a further £100 to be added by your employer, and the government in the form of basic rate tax relief. If you are a higher rate tax payer you also get a further £25 tax back from the government. So for a £75 outlay, a higher rate taxpayer can get a starting pension investment of £200.
“The savings you make from solar panels come largely from payments made to you from your energy provider, as required by law. These payments are guaranteed for 20 years, provided you don’t move house,” adds Khalaf.
The average life expectancy for a 60 year old male is 86 and for a 60 year old woman is 89. This being the average, half of people can expect to live beyond this age.