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The money people spend on cigarettes would lead to a healthy pension nestegg

Around £392 billion worth of pensions could be going up in smoke, according to research to coincide with National No Smoking Day.

If the average 20-year-old smoker kicked the habit and put what they would have spent on cigarettes into a pension instead, they would have £265,000 in their pension fund when they reach 65, research by Virgin Money calculated.

If they increased their contributions by 2% annually, which is roughly how much the price a packet of cigarettes goes up by each year, they would have £353,000.

Virgin Money Pensions spokesman Jason Wyer-Smith said: "There are an estimated 1.48 million smokers aged between 20 and 24 in the UK.

"If they all gave up smoking at 20 and put the money into a stakeholder pension instead, their combined retirement funds when they reached 65 would amount to an astonishing £392 billion.

"And that's without increasing their contributions every time (Chancellor) Gordon Brown puts the price of cigarettes up.

"Young smokers should consider the cost smoking has to their health and to their finances.

"Over a quarter of a million pounds-worth of pension fund is a big price to pay for a half pack a day habit.

"But more importantly, by giving up cigarettes they'll have a much better chance of making it to retirement as well."