The new State Pension currently gives you just £168.60 a week, or just £8,767.20 a year, but only if you qualify for the maximum amount. Plenty of people will get much less than that.
That’s why it’s so important to save under your own steam, and there’s no time to waste. A great way to boost your retirement income is to build an investment portfolio of FTSE 100 companies, tax-free, inside a Stocks and Shares ISA.
Spread your wealth
Interactive Investor has just drawn up its ideal portfolio of 10 stocks, which it reckons can help you generate £10,000 of annual income, regardless of market conditions, easily more than the State Pension. You won’t generate that overnight. First, you have to build your portfolio until it’s worth £157,000. After that, the income will largely take care of itself.
The spread of stocks offers a prospective dividend yield of 6.4%. If you reinvest your dividends for growth, by this time next year your £157,000 would be worth just over £167,000, with any share price growth on top.
Ten stocks for a rising income.
| Stock | Sum invested | Yield | Income |
| Aviva | £15,000 | 7.5% | £1,125 |
| BP | £20,000 | 6% | £1,200 |
| GlaxoSmithKline | £20,000 | 4.5% | £900 |
| Hays | £15,000 | 4.9% | £735 |
| Imperial Brands | £15,000 | 10.7% | £1,605 |
| Lloyds Banking Group | £15,000 | 5.4% | £810 |
| Persimmon | £15,000 | 8.7% | £1,305 |
| Rio Tinto | £15,000 | 7.5% | £1,125 |
| Sainsbury’s | £12,000 | 4.6% | £552 |
| United Utilities | £15,000 | 4.4% | £660 |
| Total | £157,000 | £10,017 |
There are some really juicy dividends in there, led by tobacco giant Imperial Brand’s quite monstrous 10.7% a year payout, one of the highest on the index.
I have regularly tipped Lloyds Banking Group, both for share price growth and a rising income stream. The stock has yet to take off, but the income is starting to come through.
Build your long-term wealth
I’ve also been an admirer of the housebuilding sector, including Persimmon. Steady demand for property in our crowded country gives it a secure base, and its 8.7% dividend yield could power your retirement income.
It’s wise to have a good spread of sectors, and this portfolio includes pharmaceutical favourite GlaxoSmithKline. Glaxo’s dividend has been frozen at around 80p for some years now, while management diverts cash into R&D to build its drugs pipeline. But, hopefully, this will produce a stronger business when the new product lines start flowing.
Let the income flow
Interactive Investor has also given new exposure to commodities stocks, via Rio Tinto, which yields a mighty 7.5%, and the utility sector, courtesy of United Utilities. Its current yield of 4.4% may not be the highest on this list, but the company will add some defensive ballast to your portfolio.
You also get exposure to the insurance sector along with a juicy 7.5% yield from Aviva, as well as the energy market with oil giant BP and, interestingly, the supermarket sector with Sainsbury’s. The grocer has struggled amid intense competition, but its dividends have held firm. FTSE 250-listed recruiter Hays also has its fans on the Fool.
You don’t have to mimic this exact portfolio, but it’s a good starting point. Building your own portfolio to generate a rising passive income can help put any State Pension fears behind you.
