A monthly £3,215 from a Stocks and Shares ISA, roughly matching the average UK salary, sounds simple on paper. But in reality, it raises a far tougher question: how do you actually build a portfolio big enough to generate it?
Crunching the numbers
If an investor contributes £10,000 a year and gradually increases that to £13,000, a portfolio growing at 8% a year would reach roughly £777,000 after 25 years.
But that assumes starting from zero.
In reality, many investors already have ISA savings. HMRC data suggests ISA balances often sit around the £30,000 mark. So I will use that as a starting point. This additional upfront capital changes the outcome significantly.
Adding that £30,000 lifts the final portfolio to around £964,500, which is enough to support a 4% withdrawal of roughly £3,215 a month.
Crucially, that starting balance isn’t directly comparable to the contributions. While investors add contributions gradually over time, the £30,000 is invested from day one — giving it the full benefit of 25 years of compounding.
That distinction shows up clearly in the numbers. Total contributions over the 25-year investing timeframe account for £276,000. The remaining £688,000 is generated through investment growth.
Of that, roughly £200,000 can be attributed to the compounding of the initial £30,000 alone — with the rest coming from the growth on contributions as they build over time.
In the end, contributions get you started — but time and compounding do most of the work.
Dividends and growth
One stock that fits this idea of growth working alongside long-term compounding is Aberdeen (LSE: ABDN).
The FTSE 250 asset manager currently offers a dividend yield of 7%, which already makes it attractive to income-focused investors. But the more interesting angle is where that income comes from.
A growing share of the business is now driven by interactive investor, its retail investing platform. Revenue here is closely tied to long-term investing behaviour — SIPPs, ISAs, and regular contributions. These are the same forces that underpin compounding in private portfolios.
In FY25, interactive investor delivered strong profit growth alongside continued customer expansion, with particularly strong momentum in pension-linked accounts. This is important because it links earnings more directly to long-term investing activity, rather than short-term market conditions.
In effect, the business benefits from the same compounding behaviour that investors are trying to harness themselves.
That creates a slightly different proposition: a high starting yield, combined with exposure to the structural growth of long-term investing habits.
Bottom line
Aberdeen sits at the intersection of two powerful long-term forces: the shift towards individual investing through SIPPs and ISAs, and its established expertise in emerging markets. This is a region that could benefit over the coming decade as capital rotation broadens beyond concentrated US exposure.
The key risk remains outflows. While these have eased from their peak, the business is still in transition after a difficult multi-year period. Progress is ongoing rather than complete.
Even so, the combination of a high starting income yield and improving operational momentum across parts of the group is notable. If fund flows continue to stabilise and platform growth compounds, Aberdeen has the potential to gradually re-rate as confidence rebuilds.
