Current annuity rates are so rubbish that you'd be better off putting any spare cash into sticking solar panels on your roof. That's the view of Energy Minister Greg Barker, handing advice to those approaching retirement.
Although the initial up-front investment is substantial, Barker says solar savings shine long term. Is he right? %VIRTUAL-SkimlinksPromo%
Yes, mostly. The solar panel savings were certainly a bargain before the Government slashed the solar panel feed-in tariff in mid-2012. Those installing solar panels before that time enjoyed a 21p per kilowatt hour of electricity subsidy, which the Government - breaking its previous promise - cut to 16p. It's currently 14.9p.
The subsidy revision length was also cut to 20 years from 25. The move caused outrage. However, there's an upside to those considering the shift to solar panels now. Installation costs have plummeted from (often) five figure sums to four figures.
"Solar is a really attractive financial proposition," Barker told the Telegraph. "You get a guaranteed tariff for 20 years and if your panel is well-sited, it could yield 8 per cent or more. That is more than an annuity, particularly if you are in your 50s or early 60s."
Bear in mind the feed-in-tariff looks likely to sink over time - but the installation costs are sinking due to economies of scale.
You will also make save more money "by using the energy as you're producing it, rather than exporting it back to the grid," Energy Trust spokesperson Julian Roberts told AOL Money. In other words, use the washing machine when the sun's out, not when the sky's filthy dirty.
Don't think solar panels should replace saving for a pension warns Laith Khalaf from investment specialists Hargreaves Lansdown. "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."
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The savings you make from solar panels come largely from payments made to you from your energy provider, as required by law Khalaf adds. These payments are guaranteed for 20 years - as long as you don't move house.
Around 500,000 British homes now have PV panels. However that number needs to rise to 10m in the next six years if the UK is to match its renewable energy potential, claims new research from Imperial College, London.
You can check all current tariffs here, going toward the bottom of the page link.
Seven retirement nightmares
Energy minister claims solar panels are better than a pension
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship. Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so. To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension. In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.
Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.
Around 427,000 households in the over-70 age groups are either three months behind with a debt repayment or subject to some form of debt action such as insolvency, according to the Consumer Credit Counselling Service (CCCS).
Its figures also show that those aged 60 or older who came to the CCCS for help last year owed an average of £22,330. Whether you are retired or not, the best way to tackle debt problems is head on.
Free counselling services from the likes of CCCS and Citizens Advice can help with budgeting and dealing with creditors.
Importantly, they can also conduct a welfare benefits check to make sure you are receiving the pension credit, housing and council tax benefits, attendance and disability living allowances you are entitled to.
The average UK pensioner household faces a £111,400 tax bill in retirement as increasing longevity means pensioners are living on average up to 19 years past the age of 65, according to figures from MetLife. And every year in retirement adds an extra £5,864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. You can be forced to go bankrupt if you fail to pay your taxes, so it is vital to factor these costs into your retirement planning.It is also important to check that you are receiving all the benefits and tax breaks you are entitled to if you want to make the most of your retirement cash.
The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.
Older Britons are often targeted by unscrupulous criminals - especially if they have a bit of money put away. For example, many over 50s were victims of the so-called courier scam that tricked into keying their pin numbers into their phones and handing their cards to "couriers" who visited their homes. It parted consumers from £1.5 million in under two years. Detective Chief Inspector Paul Barnard, head of the bank sponsored dedicated cheque and plastic crime unit (DCPCU), said: "Many of us feel confident that we can spot fraudsters, but this type of crime can be sophisticated and could happen to anyone." The same is true of boiler room scams that target wealthier Britons with money to invest, offering "once-in-a-lifetime" opportunities to snap up shares at bargain prices. Tactics to watch out for include cold calling, putting you under pressure to pay up or lose the opportunity for good, and claiming to have insider information that they are prepared to share with you.