Money going up in smoke

National No Smoking Day has come and gone but smokers can’t breathe easy as the official pressure to stub out the habit is about to get even more intense. From July 1st smoking will be banned in public places which means a cigarette with a drink will no longer be possible in pubs and restaurants. Experts reckon that will be enough to persuade another 2.8 million smokers to pack it in.

Hardcore smokers however have kept on puffing despite the well-known link from cigarette smoking to lung cancer so will take some persuasion to give up.

If the thought of spending nights out standing outside a pub to have a cigarette isn’t enough to persuade you to ditch the fags is here to show you the financial side effects……..

Money to burn

Gordon Brown always hits smokers in the pocket at the Budget and the price of a packet of 20 is now well above £5 and heading past the £6 mark.

A 20-day smoker will spend around £42 a week or £2,184 a year feeding their habit. Put that cash in a savings account instead of burning it and you’ll be quids in. Investing £2,184 in a cash ISA paying six per cent a year and you’ll pocket £131 tax-free.

If you show as much dedication to saving as you have done to smoking you could have a tidy nest-egg built up within a few years.

It’s an expensive life

Smokers pay more for life insurance because statistics show they will die younger. Insurers therefore believe there’s more risk for them in insuring smokers as there’s more of a chance they will have to pay out on life insurance.

Term insurance – which is usually taken out to cover a mortgage and for a term such as 25 or 30 years – costs on average almost double for a smoker as it would do for a non-smoker.

A 35-year-old male smoker would pay around £28 for £100,000 of life insurance while a non-smoking 35-year-old man would pay about £15. A saving of £13 a month might not sound that attractive but over 25 years it would add up to a tidy £3,900.

And it’s just not life insurance premiums that are affected by smoking – critical illness and income protection premiums are higher for smokers. On average you’ll pay around a third more if you are a smoker.

Giving up smoking would therefore save you plenty of money on insurance. But you’ll only save if you make sure your insurer knows that you’re now a non-smoker.

In order to qualify as a non-smoker in the eyes of insurers you have to have given up for a year. So if you stub out the smoking habit now you’ll need to wait a year – and stay off the fags for a year – before cashing in by getting your life insurance premium cut.

If you are now a non-smoker it can make sense to shop around for a new policy. Over the past 10 years life insurance premiums have dropped and it may be that you can make substantial savings. Even non-smokers can save money by looking for a new life insurer.

It’s not always best to be a non-smoker..

Smokers are not always financial losers. In fact when it comes to pensions they are quids in.

When it comes time to buy an annuity – the financial product used to turn your pension savings into income – it actually pays to be a smoker. You could qualify for an income of up to 10 per cent more and can look forward to retirement with a bit more cash in your pocket.

However the reason they give you more cash is because they are betting you won’t live too long. Smokers qualify for what is called an impaired life annuity – the assumption is you’ll die so they won’t have to pay the money out for that long.

Stub it out can help show you the best life insurance premiums around and the best savings and investment accounts to invest all the cash you’ll save from giving up smoking.

And if you’re still not convinced – the choices are spending £2,000 a year on something which will kill you while paying over the odds for life insurance on the off-chance that if you survive you’ll get a slightly bigger pension because the firm reckons you’ll die early.

Or on the other hand you can keep on smoking…

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