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Minister backs solar power over pensions

Energy Minister Greg Barker recently said solar panels were a better investment than pensions, but is he right?

Should you consider solar panels ahead of investing in your pension?

Should you consider solar panels ahead of investing in your pension?

According to Barker, although the installation process can cost thousands of pounds, savings on energy bills combined with profits from selling off excess power, mean solar panels can prove a better investment than some pensions.  

The average cost of installing solar panels has fallen from £13,000 in 2010 to about £4,500 today. In contrast, returns on annuities have dropped and pension savings of £100,000 will typically provide £6,000 in income.

‘If your panel is well-sited, it could yield […]more than an annuity’

Speaking to The Telegraph, Barker said: “Solar is a really attractive financial proposition, 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.

“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.”

Not a replacement for a pension

Finance experts have warned that, although solar panels do present a number of positives they should in no way be viewed as a replacement for a pension.

Head of Corporate Research at Hargreaves Lansdown Laith Khalaf, said: “There is nothing wrong with the idea of installing solar panels, but it is not a way to save for retirement. Rather, they are something you spend your retirement savings on.”

In fact, research carried out by The Telegraph found that over the long term, people are usually better off sticking to a pension.

Ten million solar panels by 2020?

According to research carried out by Imperial College London, ten million UK homes need to install solar panels on their roofs by 2020 if the country is to meet its renewable energy potential.

The figure represents one third of British homes and would see 6% of the country’s electricity needs being met through solar power. At present only half a million residents have installed solar panels on their home, however, a big push for solar installations could result in ten million adopters. A solar panel campaign carried out in Germany achieved similar results.

Ajay Gambhir of Imperial College London, one of the researchers behind the report, added that the more solar panels are installed the cheaper they will become, largely due to economies of scale. In this context, by 2030 the cost of producing solar energy could fall to levels in line with those of the most polluting fuels, such as coal.

Want to find out more about solar panels? Check out our list of guides.

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