With the UK State Pension now paying out £241.30 a week, Britons receiving the full amount are now getting just shy of £12,550 a year. But even after this recent payout bump, that still falls short of the £13,400 that Pensions UK has estimated someone needs to meet the absolute basic living standards.
The good news is that by putting aside as little as £30 a week early on in a career and investing this money in high-quality UK shares, someone can double this income. Here’s how.
Regular stock investments and compounding
On average, the UK stock market generates a return of around 8% a year over the long term. And with trading fees dropping drastically over the last two decades, investing has never been more accessible to the British public, even those earning the Minimum Wage.
But to keep fees as low as possible, it’s often best to put money into an interest-paying savings account each week, and then invest this capital at the end of each month.
For anyone putting £30 aside each week, that translates into an average of £130 available to invest each month. And assuming a portfolio matches the stock market’s average return, then after 40 years of compounding, a total of £453,831 is unlocked.
Following the 4% withdrawal rule, that’s enough to generate an additional retirement income of £18,153. And when combined with the current State Pension, that translates into a total passive income of just over £30,000 – more than double the government provides alone.
Of course, not everyone has 40 years ahead. But by making a few sacrifices to have more money for investments each week, the timeline can be drastically accelerated.
| Weekly Investment Capital | Time To Reach ~£450,000 At An 8% Return |
| £30 | 40 Years |
| £50 | 34 Years |
| £70 | 30 Years |
| £100 | 26 Years |
| £150 | 22 Years |
Which stocks should investors buy?
Over the next 20-40 years, the UK State Pension is likely to change. And with concerns about the long-term sustainability of the triple lock, Britons could end up with less support from the government in the future, highlighting why building additional retirement wealth is crucial.
But of course, the next question is, what stocks should investors consider buying?
Most investment advisors often recommend building out a solid foundation of boring but dependable industry giants. And today, AstraZeneca (LSE:AZN) is ranked as one of the most recommended large-cap stocks for long-term investors building a new portfolio.
The biopharmaceutical giant has a vast portfolio of drugs targeting a wide range of diseases. And with management outlining its ambitions to grow revenues from $58.7bn in 2025 to over $80bn by 2030, the firm continues to invest heavily in its development pipeline.
With continuous structural demand for AstraZeneca’s products even during recessions, the business has proven to be remarkably resilient during economic wobbles. And it’s why it’s a popular favourite among both experts and everyday investors.
However, there are still risks. Drug patents eventually expire. And AstraZeneca has a few blockbuster treatments losing their protection in the coming years. That may not be a problem if new treatments replace the lost revenue. But drug development is notoriously challenging and, as such, it’s possible that the business falls short of its targets.
Nevertheless, with a long track record of success, AstraZeneca shares could be worth mulling for investors looking to start building a retirement portfolio that can generate a State Pension-beating passive income.
