A year ago I mentioned that I was investing in solar panels. Well, I am pleased to say that so far, they have turned out very well indeed.
I paid £6,250 for them, and so far I have made £700 from generation and export tariffs. That is an 11 per cent return in pure income terms.
But more than this, our electricity and gas bills are around £500 lower based on our average energy use over the past two years.
So that is around £1,200 from a £6,250 outlay – a return of 19.2 per cent.
As the export tariffs are linked to RPI I am expecting that we will have broken even within five years and be in profit for the following 15.
Even after the tariffs end, we will still be picking up some free energy.
And, of course, this income is tax-free.
How does this compare with the alternative uses for my money?
Well, I would have been lucky to have made much more than 1 per cent in a savings account.
I already have enough money in the stock market. For the record, as I write this the FTSE 100 is up by just 1 per cent over the past 12 months, though it would have provided almost 4 per cent income as well – and I am sure some investment funds will have delivered more.
I could have plumped for some form of investment bond, I suppose. But let us not even go there.
I must admit to being a tad surprised by just how well my panels have performed financially.
At the outset I had been hoping to break even within seven years. I did benefit from an exceedingly sunny May – but then both last November and this October were very gloomy, and the last two weeks of August were horrendous.
The point is that with interest rates likely to remain at historic lows we do need alternative places to put our money and earn a decent return. Not every penny we save can sit in the stock market, and some of us are reluctant to invest in property.
“With interest rates likely to remain at historic lows we do need alternative places to put our money”Sadly residential tariffs are about to be slashed by the government, which seems to prefer underwriting nuclear power plants run by big energy companies than solar power produced by UK householders.
Hence EDF will be guaranteed an inflation-linked 9.25p per kilowatt hour for energy produced at Hinkley Point C, while residential solar will be offered 1.63p on energy generated and used in the household and 6.48p on energy generated and exported to the grid.
From January these tariffs might just lead to break-even after 20 years – which I suppose could be compared with investing in a Target Life pension.
A problem for the future
There was no more clarity on dealing with insistent clients from lead ombudsman Caroline Mitchell at last week’s FT Adviser Retirement Freedom Forum.
However, I was interested in what she had to say about fears that in 20 years’ time the Financial Ombudsman Service will attempt to hold advisers responsible for carrying out the wishes of an insistent client.
Her description of the ombudsman’s approach to such an issue should give some comfort. Clear suitability reports spelling out the risk of not following a recommendation are likely to prove vital.
This really is not the ombudsman’s problem right now – as Ms Mitchell said, Fos might not even be here in 20 years.
The government has created a situation in which people are forced to take advice when the cost of that advice could take a significant chunk of their pension.
And investors can only get their money by finding an adviser willing to allow the client to act against their own better judgment.
This is a muddle which only clear regulation or a rethink of the rules can resolve. Good luck.
A global pension lottery
From the other side of the world comes the Melbourne Mercer Global Pension Index.
This provides a fascinating insight into how the UK’s pension system stacks up against others from around the world.
The general message is, we are not doing too badly, but we could do better. Auto-enrolment is a plus – although we are not putting enough in.
But what is most illuminating is the sustainability rating.
As you might expect, Australia does rather well on this, with a score of 72.1 out of 100. The UK manages to scrape to 51.3 while those model European countries Denmark and the Netherlands score 84.7 and 74.3 respectively.
But take a look at some of our other European partners. Italy gets 12.1, France 36.6 and Germany 36.8. Higher taxes, anyone?
Tony Hazell writes for the Daily Mail’s Money Mail column
