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Image source: Getty Images <\/p>\n Image source: Getty Images <\/p>\n
With a view to supplementing the State Pension, I have a Stocks and Shares ISA. Due to its attractive tax breaks and generous annual allowance, I reckon it\u2019s an excellent investment vehicle for those looking to provide for a more comfortable retirement.<\/p>\n
But how much is needed to produce an annual income of \u00a312,548, equivalent to \u00a31,046 a month, which is the same as the full State Pension? Let\u2019s see.<\/p>\n
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.<\/p>\n
What returns are available? <\/p>\n
At the moment (6 June), the UK\u2019s major stock market indices have dividend yields of at least 3%:<\/p>\n
FTSE 100<\/strong> \u2013 3.06%<\/p>\n<\/li>\n FTSE 250<\/strong> \u2013 3.53%<\/p>\n<\/li>\n FTSE All-Share<\/strong> \u2013 3.12%<\/p>\n<\/li>\n<\/ul>\n But these averages include some companies that pay less generous dividends, or none at all. Exclude these and the figures become very exciting. For example, the top 50 are currently averaging 10.5%.<\/p>\n With this level of return, a Stocks and Shares ISA would need to be valued at \u00a3119,505 to reach our income target of \u00a31,046 a month.<\/p>\n Personally, I think this would be a very welcome addition to the State Pension. I reckon it would go a long way to giving someone a more financially comfortable retirement. But how could an individual seek to build an ISA worth this much?<\/p>\n Some important numbers <\/p>\n For most people, investing little and often is likely to be the answer. As an illustration, putting \u00a3150 a month into an ISA \u2014 at an annual return of 7% \u2014 would grow to \u00a3118,120 after 25 years.<\/p>\n However, I reckon it\u2019s possible to achieve a better return by adopting a stock-picking strategy.<\/p>\n Don\u2019t believe me? Well, look at how this five-stock portfolio of FTSE 100 shares has performed since June 2021. I\u2019ve picked well-known names from different sectors and, overall, they\u2019ve delivered an average annual return of 19%.<\/p>\n Stock<\/strong><\/p>\n Sector<\/strong><\/p>\n 5-year average annual share price growth <\/strong>(%)<\/p>\n<\/tr>\n Babcock International Group <\/strong>(LSE:BAB)<\/p>\n<\/td>\n Defence<\/p>\n<\/td>\n 28<\/p>\n<\/td>\n<\/tr>\n Barclays<\/strong><\/p>\n<\/td>\n Banking<\/p>\n<\/td>\n 20<\/p>\n<\/td>\n<\/tr>\n Marks & Spencer<\/strong><\/p>\n<\/td>\n Retail<\/p>\n<\/td>\n 18<\/p>\n<\/td>\n<\/tr>\n Shell<\/strong><\/p>\n<\/td>\n Energy<\/p>\n<\/td>\n 17<\/p>\n<\/td>\n<\/tr>\n Halma<\/strong><\/p>\n<\/td>\n Technology<\/p>\n<\/td>\n 13<\/p>\n<\/td>\n<\/tr>\n Average<\/strong><\/p>\n<\/td>\n \u00a0<\/strong><\/p>\n<\/td>\n 19<\/strong><\/p>\n<\/td>\n<\/tr>\n Investing \u00a3100 a month at 19% would create an ISA worth \u00a3482,451 after 25 years. Convert this into a portfolio of dividend shares paying 10.5% (no guarantees, of course) and it would be possible to generate an amazing \u00a350,657 a year in retirement.<\/p>\n Right place, right time <\/p>\n Fortunately, I own the top performer on the list, Babcock International Group, the country\u2019s second largest defence contractor.<\/p>\n Admittedly, the sector isn\u2019t to everyone\u2019s liking, which means there\u2019s a smaller pool of investors to help drive Babcock\u2019s share price higher. But we have to deal with the world as we find it rather than how we would like it to be.<\/p>\n And with NATO members, including Britain, pledging to spend 3.5% of GDP annually on core defence by 2035, the group could be one of the biggest beneficiaries.<\/p>\n Over the past four financial years, it\u2019s increased its underlying operating earnings per share by 64%, improved its return on invested capital from 17.4% to 37%, and significantly reduced its net debt relative to EBITDA.<\/p>\n However, as a reminder of how operationally challenging the industry can be, it\u2019s incurred an estimated \u00a3330m of cost over-runs on its Type 31 frigate contract with the Royal Navy during this period.<\/p>\n But with a trailing price-to-earnings ratio of 20.3, its shares are cheaper than those of its FTSE 100 rival BAE Systems<\/strong> (27.7). And with its strong balance sheet and large order book, I think Babcock\u2019s a stock that could be considered by those looking to build significant long-term wealth to help fund their retirement.<\/p>\n Should you invest \u00a35,000 in Babcock International Group Plc right now? <\/p>\n When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.<\/p>\n And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Babcock International Group Plc made the list?<\/p>\n See The Six Stocks<\/p>\n James Beard owns shares in Babcock International Group plc and Barclays plc.<\/p>\n The post How much is needed in an ISA to target a \u00a31,046 monthly passive income in retirement?<\/a> appeared first on The Twelfth Magpie<\/a>.<\/p>\n More reading<\/strong><\/p>\n Motley Fool UK 2026<\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images With a view to supplementing the State Pension, I have a Stocks and Shares…\n","protected":false},"author":2,"featured_media":521698,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[177],"tags":[134014,225407,79,18,6617,19,17,55535,234,235,3887,4121,50855],"class_list":["post-521697","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-annual-return","tag-babcock-international-group","tag-business","tag-eire","tag-ftse-100","tag-ie","tag-ireland","tag-isa","tag-personal-finance","tag-personalfinance","tag-retirement","tag-state-pension","tag-stocks-and-shares-isa"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@ie\/116703182410060230","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/521697","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=521697"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/521697\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/521698"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=521697"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=521697"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=521697"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n