Building a meaningful passive income from the stock market is one of the most powerful things an investor can do. But it does require capital, patience and, crucially, finding the right stocks to own.
So how big does an ISA actually need to be to generate £2,000 a month (£24,000 a year)?
How much money do you need?
Following the well-known 4% withdrawal rule, a Stocks and Shares ISA would need to be worth around £600,000 to produce £24,000 annually. Needless to say, that’s a pretty large chunk of change. And sadly, most people won’t have that sort of money just lying around.
Luckily, you might not need it. Instead of using the 4% rule to generate a passive income, investors can build a portfolio focused on generating a higher yield through dividends. And if filled with quality income stocks with generous payouts, the required size of an ISA can shrink drastically.
For example, if a portfolio generates a 7.5% yield each year, earning £24,000 would only need an ISA worth £320,000 – almost half.
Obviously, that’s still a serious amount of money. But by investing each month consistently and reinvesting dividends along the way, even a modest investor can get there over time.
The real challenge is finding a genuinely reliable 7.5% yield in the first place. So could Legal & General (LSE:LGEN) shares be the answer?
A 7.5% yield from a FTSE 100 stalwart
As a quick reminder, Legal & General’s one of the UK’s largest and most diversified financial services groups, managing over £1.2trn in assets across pension risk transfer, retail annuities, asset management, and workplace pensions for millions of customers.
That sort of business generates a lot of cash. And right now, management’s using that cash to reward shareholders with an impressive 7.5% payout.
So can it be trusted? Let’s look at the latest numbers.
In 2025, Legal & General delivered core operating profit growth of 6% to £1,623m, with earnings per share growing 9% to 20.93p. The Solvency II operational surplus (a key metric that measures how much cash Legal & General has to spare for dividends) grew 5% to £1.5bn, with the company’s coverage ratio sitting at a healthy 210%.
In other words, the business is looking quite solid at the moment.
But no investment is ever without risk. A 210% Solvency II coverage ratio’s impressive, but has slipped from 232%, driven down in part by cash being paid out to shareholders. And management’s warned it could fall further to anywhere between 160% and 190%.
Alone, that’s not a major problem. However, if it continues to deteriorate further, then it could be an early warning sign that today’s 7.5% yield might be unsustainable in the long run. Even more so considering client net outflows in its Asset Management arm continue to apply pressure to management fee income.
So what should investors make of all this?
The bottom line
For investors targeting the equivalent of a £2,000 monthly passive income, I think Legal & General shares are worth a closer look. There’s no denying the business has risks and headwinds to overcome. But with a long track record and prudent leadership at the helm, those risks might be worth taking.
Should you invest £5,000 in Legal & General Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General Group Plc made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
