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Ex-smokers could halve insurance costs and triple pension pots

Written by: Paloma Kubiak
Hundreds of thousands of people who quit smoking in the past year could potentially slash the cost of their life insurance premium in half.

Today marks National No Smoking Day and while there are an estimated eight million smokers in the UK, around 500,000 have successfully kicked the habit in the last 12 months, according to government figures.

While stubbing out the habit will undoubtedly improve their health and leave them with more cash in their pockets – a pack of 20 cigarettes costs around £10 – Britain’s army of quitters are not making the most of other financial opportunities including reducing the cost of their life insurance premiums.

Life insurance

Premiums can be twice as high for smokers, and can rise even higher if people fail to kick the habit in their 40s.

According to advice firm Drewberry, a smoker aged 27 can expect to pay a monthly premium of £16.46 while a non-smoker would pay £9.97 – a 65% difference. At age 47, the premium for a smoker rises to £56.16 while for a non-smoker, it would be £24.80 – a 126.5% difference.


Tom Conner, director of Drewberry, said those who have quit for a year can apply to have their insurance re-rated (get a new quote), as long as they sign a non-smoker declaration and take a blood, saliva or urine test to check nicotine residue in the body.

He said: “There’s at least half a million people who could now be doing this and potentially halving the price of their insurance but it seems that most former smokers are forgetting to cash in after they’ve done all the hard work.”


With the average pack of cigarettes costing close to £10, smokers who quit will have a new source of cash which could fund ISAs.

Drewberry calculated that the average 11-a-day smoker who quit a year ago and made monthly contributions to a FTSE 100 ISA (instead of buying cigarettes) would now have an investment worth £2,195. For someone who smoked a pack-a-day the figure rises £3,839.

A smoker who quit two years ago would now have an ISA worth £4,882 while a pack-a-day smoker could have £8,202 in a UK equity ISA.


But Conner said the most worthwhile home for the sudden new income stream quitting can deliver is a pension.

“Smokers who save into a pension will go from paying around 75% tax on every pack of cigarettes to receiving tax relief back from the government at their highest marginal rate,” he said.

The average smoker who quits in their 20s and feeds the money they save in cigarettes and insurance premiums into their pension could build a pension pot of well over £260,000 by age 67, according to Drewberry.

This would equate to £102,000 in today’s money or more than triple the current average pension pot at age 65 – £29,417.

For a 37-year-old, they could have a future pot worth around £171,270, while for someone aged 47 the future pension pot could still be worth over £106,000 or £65,300 in today’s money – more than twice the current average at age 65.


Conner said: “The chance to transform your retirement prospects is probably the strongest financial argument for quitting and if this year’s cohort of quitters are serious about living longer they’ll need to build far better pensions than they have now.”

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