Income shares can be an effective way of providing for a more financially secure old age.
Don’t believe me. Let’s take a look at some numbers.
Must try harder
Depending on the standard of living an individual’s seeking, industry experts reckon a single person will need the following annual income in retirement:
- Minimum – £13,900.
- Moderate – £32,700.
- Comfortable – £45,400.
But analysis reveals that less than a quarter of people will be able to meet the target for a moderate lifestyle.
Zoe Alexander, executive director of policy and advocacy at Pensions UK, recently told the Financial Times: “That gap is particularly pronounced for those on middle and higher incomes, who often expect to maintain something close to their working-life lifestyle but are not saving at levels that make this realistic.”
Of course, the State Pension could help fill some of the gap. For those with a full record of contributions, it’s currently (2026-2027 tax year) paying £12,548 a year. However, this still leaves a shortfall. And it isn’t payable until someone is, at the moment, aged 66.
Worse, due to a combination of people living longer and the poor state of the nation’s finances, the age of entitlement is now being raised to 67.
So let’s assume that someone isn’t going to get the State Pension. Under these circumstances, is it possible to produce an annual income of £32,700 from dividend shares alone?
Do the numbers stack up?
If someone invested £293.47 a month and achieved a 6% annual return, it would result in a retirement pot of £545,016 after 40 years. A portfolio of dividends shares paying 6% (£32,701) would then meet our target for a moderate retirement.
But is 6% realistic? I think so. For example, there are 52 members of the FTSE 350 currently (20 June) yielding 6%+.
However, experienced investors know that dividends can’t be guaranteed. They can fluctuate from one year to the next and, sometimes, be suspended. There are lots of examples of companies who have had to stop returning cash to shareholders in order to shore up their balance sheets or mitigate a drop in earnings.
But look at the dividend track record of MONY Group (LSE:MONY) over its past 10 financial years:
- 2025 – 12.63p.
- 2024 – 12.50p.
- 2023 – 12.10p.
- 2019 to 2022 – 11.71p.
- 2018 – 11.05p (excluding 7.46p special dividend).
- 2017 – 10.44p.
- 2016 – 9.85p.
Apart from during the pandemic, the tech-led platform designed to help households reduce their bills, has steadily increased its annual dividend. In cash terms, its payout has risen by 28% over the decade.
And it’s now yielding 6.9%. But there are risks to this. The group’s share price wobbled in February when fears were raised that AI tools could reduce the need for its websites. However, MONY Group has now launched its own MoneySuperMarket (MSM) ChatGPT app. Time will tell how effective it is in seeing off the AI threat.
Another concern includes a potential vulnerability to a cyber attack.
My view
However, with its trusted brands – MSM is the UK’s most recommended price comparison website — scalable technology platform, and increasingly valuable real-time customer data, I think the group’s well-positioned to grow and further increase its above-average dividend.
In my opinion, this makes MONY Group a stock worthy of further consideration by pensioners and younger people alike.
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James Beard owns shares in MONY Group plc.
