This Friday, 18th January, is National Gourmet Coffee Day.

With very few indulgences left to those of us eating healthily and doing Dry January (if you haven’t cracked yet, well done!!), maybe a gourmet coffee from the local coffee shop is our one remaining daily treat.

But those small spends add up…and in the long term they can have a real impact on your pension savings.

To prove it, I cast my eye around our office and came up with some examples to show the real cost of that cappuccino (or flat white, or Americano – we don’t want to be exclusive ;)).

First up is our Communications guru, Johanna.  An energetic type, she nevertheless likes a daily coffee to keep her fuelled up.  So the sums look like this:

1 coffee a day     Cost: £3.10    Weekly: £15.50  Yearly: £728.50 (assuming 5 weeks’ leave)

With tax relief this could be worth £910 of pension contribution - or as she still (all being well!) has a good long working life ahead of her, it could be invested in a pension for 40 years and sacrificing just that single coffee a day for a year could be worth as much as £6,400 for her to spend in retirement*.

My second example is another of our Associate Directors, Darren.  With young children, Darren probably needs the caffeine to wake him up in the mornings, hence his daily coffee habit.

Using the same figures as Johanna, even for him at the ripe old age of 35(ish) this could be invested for 15 years and be worth c. £1,900 at retirement.

And don’t forget that the taxman will also let you take 25% of this tax-free when the time comes.

So I guess it just depends which you think is more important: a short-term (admittedly tasty) caffeine hit, or cash saved towards your future by providing more security in retirement?  Extra funds for holidays once you’ve finished working?  Or planning to spoil those future grandkids??  I’ll leave it with you…

*Based on investment returns average 5%. Basic rate tax relief.
Yearly total is based on 47 weeks’ expenditure, 5 weeks’ annual leave.