With smoking in all public places set to be banned from next year, Jane Hall looks at how kicking the evil weed could save you a fortune. *********** Smoking is not only bad for your health, it's bad for your pocket. Take a deep breath, because the sums are astonishing. The average British smoker spends around £100,000 on cigarettes in a lifetime. On a yearly basis that breaks down to £1,800 spent on tobacco. Collectively, UK smokers get through 72 billion fags a year, costing a shocking £17bn. Even social smokers - who only light up when they go out to bars, clubs or restaurants - spend over £11,000 in a lifetime, or £186 a year. But with MPs last week voting to ban smoking in all public places in England from summer 2007 - and Northern Ireland, Scotland and Wales already committed to taking this route - there has never been a better time to give-up cigarettes. An estimated 600,000 extra smokers are expected to give-up over the next decade on the back of the ban in England. Traditionally, exhortations to abstain from lighting-up are made by the medical profession and anti-smoking groups. But now financial advisers are joining in by pointing out the long-term monetary benefits, rather than the positive health consequences, of quitting. But preaching the financial benefits of giving up what many feel is one of life's pleasures is easier said than done. Suggesting you could save a couple of hundred pounds a month simply by being abstemious may not sound much in the grand scheme of things, and perhaps more like a life sentence than a good idea. But the trick is to make the best use of the money you save. This could provide the extra incentive you need. Instead of money going up in smoke, it could be growing in your pension fund, lopping years off your mortgage or even funding your child's future. For example, stubbing out a smoking habit and putting the money towards your mortgage will mean you avoid the deleterious effects of compound interest on those who remain in debt for long periods. The amount you save will depend on how much you spend on cigarettes. But mortgage expert Charcol has calculated that someone smoking 10 a day at a cost of £70 a month, with a £100,000 mortgage over 25 years at a rate of 5%, could save £16,049 in interest and knock four years and eight months off the term of the loan, if he or she was to channel cigarette money down this route. Someone on 20 a day costing £140 a month, with a £100,000 mortgage over 25 years at a rate of 5%, could save £26,250 in interest and pay off the loan seven years and nine months early. Drew Wotherspoon of Charcol says: "The upcoming ban on smoking is the perfect opportunity for people to really use the money they could save from kicking the habit. Even modest overpayments on a mortgage can have a profound effect on how much you pay and for how long you pay it. "Someone with an average £100,000 mortgage who is on 20 a day can save over £25,000 in interest and knock nearly eight years from the term. The vast majority of mainstream mortgage lenders offer some degree of overpayment facility these days, so borrowers should already be able to take real advantage if they give up. "Indeed, of the current crop of best buy mortgages on the market, only one of the top eight does not have the ability to overpay. "Combine this with the obvious savings on life insurance policies and borrowers should be financially delighted." It is a win-win situation. As well as the obvious health benefits, you get to own your home quicker, save thousands of pounds and increase your life expectancy. Alternatively, you could put the money away for your retirement - which would go some way towards easing the UK's pension shortfall, currently estimated at around £130bn. Taking the average yearly spend on cigarettes, Legal & General has calculated that an 18-year-old male making an annual £1,800 net contribution (£2,307.69 gross with tax relief) to its Sandler charged Stakeholder plan would, assuming 7% per annum investment growth and 4.7% for the conversion of funds to pension income, have amassed £638,000 by the age of 60. This would give an annual pension of £39,600 - more than enough to live out a healthy financial and, hopefully, physical retirement. There are other financial rewards to be reaped for those prepared to kick the habit. The health benefits of giving up smoking are not just obvious to quitters, but also to financial organisations. Smokers pays more for life assurance - in some cases almost twice as much as their non-puffing colleagues. A non-smoker's life insurance will, on average, be 30%-55% less than that of someone who smokes, which can amount to a substantial saving. A 30-year-old male smoker, for example, would pay £19 a month for £200,000 of life cover with Sainsbury's Bank over 20 years. But if he is a non-smoker the monthly premium drops to £12.80 - a saving of £6.20 or 33%. By the same token, a 30-year-old male smoker taking out the same level of cover with L&G would pay £18.95, dropping to £11.75 - a monthly saving of £7.20. With Sainsbury's Bank, a 40-year-old smoker would pay £44.40 a month dropping to £23.40 if he quits, while at L&G the figures are £45.55 and £22.15 respectively. You must remember to tell your life insurer if you have given up smoking. David Pickett, life insurance manager for Sainsbury's Bank, says: "Since December 2004, as many as two million people have given up smoking. The health benefits of giving up are well known and, with a packet of cigarettes now costing over £5, the financial savings can also be substantial. "However, once you've successfully quit, you could also make a saving in your annual life insurance premiums if you review your requirements." Other insurance products where smoking makes a difference include critical illness cover, which pays out on diagnosis of a specific condition; income replacement, also called PHI; and, occasionally, private medical insurance. Non-smokers may also receive a better deal on their household insurance. Ansvar, the ethical general insurance company based in Eastbourne, East Sussex, believes that adherence to a certain lifestyle represents a better risk, and that should be rewarded. To this end, it offers a 3% discount for non-smokers. The same discount applies for non-drinkers and also regular churchgoers or charity volunteers. Those who give up smoking may not always see an immediate benefit in premiums. To most insurers, only someone who does not use any nicotine products, including gum or patches - and who has not smoked or used these items for at least 12 months - will be classed a non-smoker In the US, insurers are more discerning, with some companies having up to six categories to cover smoking status. This allows firms to distinguish between those who have never used cigarettes, those who stopped a long time ago, recent quitters, and light to heavy smokers. Of course, quitters don't have to use the cash they save to fund their own futures - some of the money could go towards their children's. For instance, £10 per month put into an equity-based Child Trust Fund between birth and the age of 18, could see a return of £4,890 when it matures, assuming growth of 9% per year. Saving £25 per month could see a child receive £10,900 on his or her 18th birthday, which could go towards funding further education or kick-starting savings for a deposit on a first home. There is one financial product that compensates smokers, however - buying an annuity with your pensions savings to give you an income for retirement. Even those intending to kick the habit, but who have smoked 10 or more cigarettes - but not cigars - a day for 10 years, are likely to be eligible for an enhanced income in retirement. But the reality of the situation is harsh. Actuarial calculations relating to mortality prove that smokers tend to die younger than non-smokers. Because life offices are certain that most smokers have a reduced life expectancy, they can afford to pay them higher pensions than `healthy' individuals. However, fewer than 10% of smokers in the UK who could qualify for an increased pension from special smokers' annuities, are buying them. Page 2: 'Quitting saved my health and my dream wedding' | 
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