Quit smoking while you are still young, invest the money in a pension and you could end up with almost a million by the time you’re 65!
At least that’s what Paul Claireaux, quoted in the Investor’s Chronicle, believes. He’s calculated that a basic rate tax payer who quit smoking 20 cigarettes and invested the daily £7.60 savings in a SIPP would have a pension fund of £530,000 by the age of 55 or £953,865 by the age of 65.
The sum relies on investing it in a pension which is matched by a 60% employer contribution (as under the new UK government pension scheme), and which the government tops up by 20% for lower rate tax payers. Higher rate tax payers, who get a 40% government top up, would enjoy an even larger sum – but the self employed amongst us don’t even have a chance 🙁
The Cost of Smoking (and One Benefit)
To continue to smoke 1o cigarettes a day after retirement, according to article, you’d need a pension pot of £36,000. But what the article doesn’t mention is that if you are a smoker when you retire you can get higher annuities. That’s because the pension fund assumes you will die sooner, and therefore they will not have to pay out for as long. (From a strictly financial point of view, then, your best bet is to be a non-smoker until you just before you retire and then take up the habit (and then ideally quit again soon after!) )
Other smokers have done well in the past by quitting smoking and investing the money in tobacco companies. However, with e-cigarettes rapidly gaining ground on tobacco cigarettes, who knows which tobacco companies will still be surviving and thriving in ten years time!