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Tuesday, September 18, 2007

Pension Funds and Solar Panels

Some governments say that the main purpose of a pension fund is to provide for us in our retirement. They sometimes hint, that since it is a savings plan and not an investment, we shouldn't really expect much of a return (Yeah right!!!!) and should be grateful for any contributions or tax concessions they make. Since pension funds are "for our own good", lets take them at their word and see if they will "put their money where their mouth is". What about allowing us to use funds from our pension fund for putting solar water-heating panels and/or solar electric panels on our roofs or for that matter, to insulate our houses.

The oft quoted expenditure for water heating is about a third of a typical electrical bill so if we install a solar water heater, all this saved money will be available for retirement saving, making us even better off in our retirement. The typical pay back time for solar water heating is between 5 and 10 years and the earlier we install it the more we will earn. Moreover, when we retire, the children are likely out of the home so we can probably get all our hot water needs without having to use supplementary electricity. If there was ever a use of our pension money that would leave us better off in our retirement, this is it. And what about installing Solar-Electric panels. Here the benefit is even greater.

With Solar-electric, again we score well before retirement. The one time investment will pay dividends all through our life, leaving us more money from our income for saving. When we retire, with the kids out of the house and electrical demand reduced, we may even be receiving a net income from our solar panels. Our own private pension plan. Even better, since our excess generation is turning the metre backwards, we save on our tax bill. When we buy electricity, we pay GST(VAT). Since we are reducing our payments we pay less GST.

We also gain on the other end. If you sell something, you pay income tax on your earnings. Here you are simply turning the meter backwards. In so far as it is balancing your electricity use, it's neither income or expenditure so you don't pay tax on this money. Better and better.

The expense reduction I am really looking forward to, though, is when purely electrical cars with, say, a 200 km range and a reasonable price tag, come on the market. Every home will have a 'petrol station' on the roof in the form of their solar panels. The car gets plugged in and the house "fills the tank". Add solar panels to the roof and hood of the car and you could perhaps add an extra 10 to 20km of driving for a day in the sun.

A further benefit of solar electric will occur to the canny retired couple who are now at home during the day. They will be able to do their bread making, hovering, laundry etc during the day when the sun shines. This will avoid the price differential between the buying and selling price of their electricity#. Therefore it is to the advantage of the house owner to use electricity when they are generating their own. The electricity company shouldn't have it all their own way, though. A household will be producing power during the day when the electric company charge the highest rates. Their payment to you should reflect this. Also with diffuse power generation all over the country, generation will be, on average, closer to the user so line losses will be less. This should also be reflected in the payment to the domestic generator.

#There will always have to be a price differential. The power company will have to charge you more for a unit of electricity than what they pay you. After all, they must maintain the distribution network

Solar panels, whether electrical or water heating, are a true retirement saving plan but in addition they fulfil a number of national goals. These include reduction of our carbon foot print, reducing the need to build more unsightly power pylons (power generated diffusely and hence nearer to the users), reduced need to flood more river valleys, reduced negative balance of payments due to less fossil fuel imports, reduced air pollution from thermal power stations and vehicles, reduced chance of power breakdowns in times of national emergency (inter-net effect) and reduced health bills from air pollution. With such a long list of beneficial effects combined with the obvious retirement benefits, I'm sure the government will approve using pension funds for domestic solar panels. Let's see if your government is really serious when they advertise that your contribution to a pension plan is for your own good.


Anonymous said...

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Dora Cyrus said...

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