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How to invest in renewable energy via your pension scheme

Posted by John Ditchfield on 17 July 2012 at 9:10 am

In my experience most people find the subject of pensions rather difficult to comprehend, with their wicked combination of technical complexity and the very long-term nature of most schemes; for most private investors pension schemes are a great turn-off. This is unfortunate because the tax benefits, 100% income tax relief and exemption from capital gains tax, are considerable.   

The Government attempted, back in 2007, to introduce a “simplified” pension framework but for most people this has largely failed to enliven interest in this important aspect of most people’s financial planning. 

As a specialist in environmental investing it has often seemed to me that the investment opportunities which exist within this sector; renewable energy, resource efficiency and environmental services are well suited to pension investments. Given their relatively long-term nature and the opportunity for the underlying investments, especially in energy generation, to produce a regular income yield (note: income is tax free within a pension scheme so very tax efficient). 

In my view one development in the pensions market which should be of great interest to individuals is the rapid growth of the market for self-investment via what are known as SIPPs and SSAS schemes. These are basically individual pensions which break free of the normal insurance and investment company arrangements and offer a “whole of market” approach to investing pension money- including investing directly into commercial property, land as well as direct investments into company shares. Of course these areas are certainly not free of risk but in my experience people are comfortable with higher levels of risk if they can have a clearer understanding of the potential for returns.  

So what kind of assets can be held within these schemes? A good example of a specialist fund available for SIPP plans is the Guinness Renewable Energy investment fund, which invested directly into Asian solar and wind energy businesses. Guinness argues that because of the potential for huge growth in the global demand for energy, the International Energy Agency, estimate 53% growth by 2030, the renewable energy sector has enormous potential for growth particularly in the Asia Pacific economic region. We are currently working with a solar energy business looking to put a ground mounted solar installation into the company pension scheme- a really direct way to buy into the future of energy production! 

Photo by Alex Proimus

About the author: John Ditchfield is a director of  Barchester Green Investment.

If you have a question about anything in the above blog, please ask it in the comments section below.

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