Unless you’ve been living in a cave somewhere amongst the hills of mid Wales, the chances are you already well aware that interest rates are at a record low.
Towards the end of this report we have a selection of a number of renewable energy community funds right here in Wales that are offering the public fantastic interest rates, but first consider this:
After a rocky time in the financial markets post Brexit, the pound was beginning to strengthen again against the dollar, the governor of the Bank of England made an unusual decision, he actually cut interest rates even further, sending the pound tumbling again in the financial markets.
Since March 2009, savers have suffered huge financial losses, as the interest rate has held at just 0.5%.
Currently inflation sits at 0.6%, so savers were actually losing 0.1% per annum, since Mark Carney’s decision, savers are now losing 0.35% per annum.
In other words savers are now losing 3.5x more per year than they were this time last month!
There really has never been a worse time for having your money sat in a savings account.
Co-op Funding for Community Projects
Could community renewable energy projects be the answer to ended savers woes?
At the start of 2016, the government decided to end the extremely popular and lucrative Feed in Tariff for home owners. While every homeowner in the country once had the opportunity to have roof top solar panels fitted and earn back an impressive £20k+ in tax free income over the 20 years, this has been reduced dramatically so now you would be lucky if you actually recouped the money spent on having the system installed.
However, funding for larger commercial projects remains and with funding from banks being harder to get, community organisations have been set up to offer every day people the chance to invest in these renewable energy projects and earn themselves a handsome rate of interest.
Most projects accept minimum investments of £50-£100 so they are pretty easy to get into for the average man on the street.
The expected interest rates on these projects are usually around the 5% mark, and since the renewable energy projects benefit from some government backed renewable energy incentives and have a very hungry customer (The National Grid) the investment is extremely secure.
And unless extreme unforeseen events occur (nuclear holocaust, zombie apocalypse) the interest rates paid are pretty much guaranteed, a far better deal than what you can expect from the bank!
Plus you will also benefit from the Governments new Personal Savings Allowance on your earnings from these investments.
Personal Savings Allowance
In a nutshell, this means that most people will no longer be paying tax on the pennies they earn on interest from their savings in the bank each month. It work a lot like personal allowance on income tax, so right now you can earn £11,000 per year before paying any income tax. With the new personal savings allowance you can earn up to £1,000 in interest each year before paying out any interest.
You invest £30,000 in a wind farm project in Bridgend
The investment pays you 5% per year (£1,500)
You pay no tax on the first £1,000 and 20% on the remaining £500
This means you keep £1,400 and only pay £100 in tax