Stoptober and Sober October start today: Here's how quitting your vices for good could add £276,000 to your pension

Today marks the beginning of Stoptober and Sober October – the popular month-long challenges which see Britons quit smoking tobacco and drinking alcohol. 

Although the main aim for most is to improve their health, the potential impact on our bank accounts is also highly appealing. 

But how much money does completing 31 days of sobriety and tobacco abstinence actually save – and where's the best place to stash the cash?  

Britons spend around £15.60 on alcoholic drinks in a week – slightly more than half of which is drunk at home, Office for National Statistics data shows.

Smokers fork out an average of £63.91 a week on cigarettes. The average smoker has 11 a day while a cigarette costs 83p each on average.

If you take the challenge and stick with it, you could save a small fortune, experts say

It means you could save hundreds of pounds if you manage to give up smoking or drinking this October.

In a week you could save £79.51, or £344.54 in a month. Keep it up beyond the challenge, and you could save £4,135 in a year.

How to make your savings grow even further 

The savings you make by quitting smoking or drinking could be the start of a rainy day fund, or saved up for a special treat. 

If you are looking for an easy access savings account where you can withdraw the funds at any time, it's a good idea to look for one with a top interest rate – at least 4 per cent. This is Money lists the best deals here. 

You could also consider a cash Isa, as the interest you earn will be tax-free. 

However, basic rate taxpayers earning less than £50,270 don't need to pay tax on their savings unless they earn more than £1,000 in interest in a year. 

Higher rate taxpayers pay tax on interest above £500.  

Here are the top easy-access cash Isas. 

Sarah Coles, head of personal finance at AJ Bell, says: 'It’s recommended that you have three to six months’ worth of essential spending saved for emergencies while you’re of working age. 

'Everyone’s essentials are different, but in a scenario where someone has essential spending of £2,000 a month, they’d be aiming for between £6,000 and £12,000 in this account.

'If they put aside £344.54 a month in an account paying 4 per cent, they could hit the higher end of this target within three years.'

If you already have an emergency fund in cash, you could consider investing the money you save from avoiding smoking and drinking. 

This could be done in a tax-free stocks and shares Isa. 

The Isa allowance is £20,000 per year and can currently be split between stocks and cash, although the limit on cash Isas is set to fall to £12,000 per year for under-65s in 2027.  

According to analysis by the stockbroker AJ Bell, taking the average £344.54 saving from abstaining from drinking and smoking for a decade could grow to a pot of over £51,000, based on average returns. 

This would require them to get a return on their investments of 5 per cent a year, and assumes they would pay charges of 0.6 per cent.

Putting it into a workplace pension could be even more lucrative, as such contributions benefit from tax relief and employer contributions. 

Coles adds: 'If they directed it into a pension and received a matching employer contribution, over the next 20 years they could add almost £276,000 to their pension pot – assuming growth at 5 per cent a year and charges of 0.6 per cent.'

This is Money explains how to get the most out of your work pension here.  

The financial risks of not cutting back 

The biggest benefit of drinking and smoking less is to your health. 

However, cutting back could also reduce the cost of bills such as insurance.  

If your smoking and drinking habits lead to health issues in the short or long term, you could end up paying more for everything from life insurance to critical illness, income protection and health cover. 

That said, if they opt to use their pension or savings to buy an annuity to fund retirement, they could get a better deal because finance firms predict that they will die sooner.  

Coles says: 'For those who want to generate some or all of their retirement income from an annuity it could mean they potentially qualify for an enhanced annuity.

'Being a smoker will usually add anything up to 12 per cent to the expected income, while eating unhealthily and drinking could have an impact if it has led to specific conditions. 

'If it has caused high blood pressure it might add 5 per cent, if this is in addition to something like high cholesterol or obesity that requires medication it might add 10 per cent, and if it has caused other more serious conditions, it could add as much as 20 per cent.

'Of course, annuity quotes depend on a wide range of circumstances so each individual will need to compare the rates available to them personally. 

'These increases are only available because the insurer will calculate that they’re likely to have a shorter retirement than average. 

'So anyone who is weighing up the costs and benefits of new, healthier habits should bear in mind that there’s far more to be gained than lost.'

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