#21 Don't give up smoking!

by Jane Baker on 21 August 2009  |  6 comments
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The next rule in my 'what not to do with money' series is all about the hidden financial benefits of smoking.

The next rule in my 'what not to do with money' series is all about the hidden financial benefits of smoking.

#21 Don't give up smoking!

It's not often you hear bizarre advice like this, and in many corners of the finance world it would be very poor advice indeed. But if you're a smoker and you're about to retire on a pension, smoking could actually be responsible for a sizeable boost to your income.

When the time comes to convert your pension into an income using an annuity, make sure you check out specialist 'smoker' annuities to see if you can find a better deal. Companies such as Aviva, Just Retirement, LV= (formerly Liverpool Victoria) and Partnership all sell annuities like this which offer much more generous rates.

Here's how it works. The annuity company decides how much income they're going to pay you based on how long they think you'll survive. If you smoke, your life expectancy is lower than average. So, to compensate you, the annuity company pays you a higher income than a non-smoker because they expect to shell it out over a shorter period.

I know that's not exactly the most comforting thought. But the point is, if you can squeeze a bit more out of your pension, then you should. You could be around 16% better off for it.