Are Heat Pumps Worth the Investment?
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
Financial planning is about the major decisions in life – where you live, the lifestyle you provide for your family, and what your retirement will look like. Using your budget sensibly is one of the key building blocks of a financial plan. Given the rising cost of energy (and prices in general) it’s worth looking at ways to heat and power your home more efficiently.
In this guide, our team at Castlegate (financial planners in Grantham) explore the pros and cons of having a heat pump installed and how this might impact your finances. We hope you find this content helpful. If you want to discuss your own financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
01476 855 585
info@casfin.co.uk
What is a heat pump and why should you be interested?
A heat pump, as the name would suggest, is designed to provide heating to your home. It is powered by electricity and aims to absorb heat from the air, ground, or water around your property.
It is believed that a heat pump is around three times more efficient than a traditional boiler system.
Heat pumps have recently piqued the public interest for three main reasons:
The government is offering a £5,000 incentive if you upgrade a standard boiler to a heat pump system.
No VAT will be payable on heat pumps for the next 5 years.
Rising concern over fossil fuels, both in terms of cost and environmental impact. As gas and oil are limited resources, other options need to be considered.
Financial implications
The £5,000 incentive is certainly attractive, but it is unlikely to cover the full cost of a heat pump system.
According to the Energy Saving Trust, air source heat pumps cost between £7,000 and £13,000, while ground source heat pumps could cost as much as £49,000. While ground source heat pumps have a much higher initial outlay, they are considered to be more efficient over the long term.
It is likely that a heat pump will save money on your energy bills, but the extent of this depends on your existing system. If you have a relatively new A-rated gas boiler, you are likely to see little if any saving. Replacing some types of older boiler, on the other hand, could save over £3,000 per year.
If we take a mid-range assumption – spending £5,000 in addition to the grant, and saving £1,500 per year on your bills – you can expect to recoup your initial outlay in 3-4 years, with a net positive return over a longer period. Of course, this will be different for every household.
Practical considerations
To install a heat pump, you will need somewhere to put it. This is a question not only of space, but of accessibility and convenience.
A ground source heat pump requires a patch of land on which digging or drilling can take place. This must be accessible for the machinery and away from trees or other obstructions. This process may not be ideal if you have children or pets, or if you have neighbours close by. There is also an indoor component, roughly the size of a large kitchen appliance, that will require storage space.
An air source heat pump is simpler to install, although you will still need some outside space with a reasonable flow of air around the unit.
You will also need to check if your existing radiators and/or underfloor heating system are suitable for use with a heat pump. If not, you may need to consider replacing them. Unlike a combi-boiler, most heat pumps don’t instantly produce hot water and you might need to install a hot water cylinder.
Are you eligible?
Anyone can install a heat pump, providing their property is suitable and their heating system is (or will be) compatible.
The following conditions apply to the £5,000 incentive:
- It is only available to residents of England and Wales.
- Renters can take advantage of the scheme (landlord permitting), but social tenants are excluded.
- The scheme cannot be used in new build properties.
- The property must have an Energy Performance Certificate (EPC) issued in the last 10 years.
- You might need to install insulation before you can qualify.
Final thoughts
A heat pump could potentially offer greater energy efficiency and savings on your monthly bills. If you qualify for the £5,000 grant and have an older boiler system, installing a heat pump could be a financially savvy move.
On the other hand, there will be some initial costs and upheaval to take into account, with the ground source system being significantly more expensive and cumbersome than the air source system.
If you already have an efficient heating system, or if you plan to move in the next few years, installing a heat pump is unlikely to be worthwhile.
Conclusion & invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
