Energy minister claims solar panels are better than a pension

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England, West Sussex, Chichester, Graylingwell Park, Modern housing with solar panels blended seamlessly in to roof tiles....

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?

Sunny savings?

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."

Switched on

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."

Check your tariff

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.

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