If you want to replace a £2,225 monthly salary from a SIPP, it requires a serious chunk of change.
That figure equates to a £26,700 annual income stream, which, based on the widely used 4% withdrawal rule, would require a pension pot of roughly £667,500.
Here’s how the maths breaks down:
- Target monthly income: £2,225
- Equivalent annual income: £26,700
- Withdrawal rate: 4%
- SIPP pot required: £667,500
At first glance, that can feel like a daunting target. But it’s not just about the size of the portfolio, but also what kind of investing behaviour could help you achieve your goals.
Slow and steady wins the race?
Building such a sizeable SIPP isn’t going to happen in a day. It’s built through years of regular contributions, reinvested dividends, and the quiet power of compounding over decades.
The biggest driver of the final outcome usually isn’t short-term gains. I think the key to a long-term passive income is consistency and discipline when it comes to investing.
So, which types of stocks could investors consider as part of this long-term approach for the future?
A steady dividend payer?
One example I think fits the brief well is Legal & General (LSE: LGEN). As I write on Friday afternoon (19 June), the shares offer a dividend yield of 7.7%.
That’s one of the most generous in the FTSE 100 but it’s not just the headline number that could appeal to investors looking to build a passive income.
The business has built a reputation as one of the most consistent dividend payers in the Footsie, supported by a capital-light, cash-generative model. In fact, it has managed to maintain or increase its dividend dating back to the 2008 global financial crisis (GFC).
In March this year, management announced a 2% dividend increase alongside a £1.2bn share buyback. That was the largest in the company’s history and signals real confidence from management in its cash generation abilities.
We are on track to achieve the financial targets set out in our strategy; our priority now is to accelerate this momentum, maintaining discipline and delivering enhanced shareholder returns.
António Simões, Chief Executive, Legal & General – 2025 Full-Year Results
The risks worth remembering
There’s an important catch, though. Dividends are never guaranteed. They’re paid entirely at the company’s discretion and can be cut at any time, particularly if earnings or solvency come under pressure in a downturn.
That’s exactly why diversification matters so much. Leaning on a single stock for passive income creates concentration risk with all of those investment eggs tied up in one basket.
A spread of investments across different sectors can create a more resilient SIPP income and help to ride the ups and downs of the market over time.
Identifying a stock with a high yield is just a starting point. I want to ensure I’m continuing to add high quality names with long-term potential to my own portfolio.
My verdict
A £667,500 SIPP is a serious target, but a realistic one for those who start early and invest consistently. A stock like Legal & General can play a part, but in my view the real driver is consistency, discipline, and diversification over time.
Should you invest £5,000 in Legal & General Group Plc right now?
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Ken Hall does not hold any positions in the companies mentioned.
