Everybody should aim to build up the maximum State Pension, but they shouldn’t stop there. Because the harsh truth is that it simply won’t be enough to fund a decent retirement.
The new State Pension is currently worth a maximum of £12,547. That’s below the income required to fund the ‘minimum’ lifestyle, according to the latest Retirement Living Standards survey.
| Lifestyle target | Single person | Couple |
| Minimum | £ 13,400 | £ 21,500 |
| Moderate | £ 31,700 | £ 43,900 |
| Comfortable | £ 43,900 | £ 60,600 |
These figures also assume that you have no mortgage or rental costs in retirement. Many of us will.
How could a Stocks and Shares ISA help me?
As the table shows, you need £31,700 a year to enjoy a moderate lifestyle. After deducting the State Pension, it leaves you £19,153 to make up under your own steam. Which works out as £1,596 a month. In my view, a brilliant way of generating that is to invest in a Stocks and Shares ISA. That way, all your income and growth is entirely tax-free.
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.
A popular way to build ISA wealth is to invest in a spread of mostly FTSE 100 stocks offering both share price growth and dividend income. It’s what I do myself. So how much do you need to generate £19,153 a year? The answer depends on the yield:
- With a 4% yield, you’d need £478,825 invested.
- At 5%, the required total falls to £383,060.
- And at 6%, the figure drops to £319,217.
These may look daunting sums, but over a working lifetime, they’re achievable. Let’s say an investor put away £250 a month, for 30 years. We’ll also assume their money grew at an average of 9.64% a year. That’s the return on the average Stocks and Shares ISA over the last decade, according to Unbiased. Under those assumptions, they’d have £505,495, easily beating the targets above. Of course investments returns aren’t guaranteed. You might get more, you might get less.
Could Aviva fund my retirement?
One FTSE 100 stock worth considering is insurer and asset manager Aviva (LSE: AV). It shares have done well lately, climbing 53% in the last five years. They’ve also handed investors some really generous dividends. Today, the trailing yield is 6.1%. That’s on top of all the growth.
Chief executive Amanda Blanc has transformed the business since 2020. She’s streamlined operations, cut costs, widened margins and boosted cash generation.
All shares can be volatile, including this one. Blanc now faces a tough challenge integrating the recent £3.7bn flagship purchase of insurer Direct Line. Aviva generates much of its revenue in the UK, and our economy is struggling. Also, the shares are looking a bit expensive after their strong run.
I think it’s well worth considering with a long-term view though, and would suggest drip-feeding money in. I’d buy it myself, but I already have a large position in Aviva’s big FTSE 100 rival Legal & General Group. That’s worth checking out too.
Should you invest £5,000 in Aviva Plc right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva Plc made the list?
Harvey Jones owns shares in Legal & General Group.
