Half a million pounds saved up in a Self-Invested Personal Pension (SIPP) is a pretty impressive pension pot. After all, the average for a 65-year-old in Britain is only £145,900. But is this latter amount enough for a comfortable retirement? Sadly not.
In 2025, the Pensions and Lifetime Savings Association estimated that pensioners need around £43,900 a year. And when following the 4% withdrawal rule, a £500,000 portfolio will only generate around £20,000 per year. Combining this with the State Pension will help move closer to the goal, but not enough.
So how big a SIPP do investors actually need? And what’s the best strategy to reach this milestone?
Crunching the numbers
If £43,900’s the goal, and the full UK State Pension provides £11,973 each year, then a portfolio must generate £31,927 passively. By keeping withdrawals at 4%, that means a pension pot will need to be just over £798,000.
So let’s say an investor has just turned 40 and saving for a comfortable retirement’s their top priority. So much so that they’re going to make sacrifices and put aside £1,000 each month to invest using a SIPP.
As a basic-rate taxpayer, the government provides 20% tax relief, transforming this £1,000 monthly deposit into £1,250 of investable capital. And after making some smart investment decisions, a portfolio is steadily built over time, matching the stock market’s average total annual return of 8%.
Twenty five years have passed, and the investor has just turned 65 and is now ready to retire. So how much money do they have in their SIPP?
The answer: £1,188,783 – enough to generate £47,550 each year, before the extra gains from the State Pension.
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.
Aiming higher
Retiring with close to £1.2m in the bank is nothing to scoff at. But 25 years is a long time for inflation to eat away at spending power. And if it averages 2%, then today’s £43,900 target would be the equivalent of £72,000 in 2050.
This is where investors may want to consider a custom portfolio over an index fund. Stock picking comes with more risks and responsibilities. But it also opens the door to potentially life-changing returns.
Perhaps a perfect example of this over the last 25 years is Domino’s Pizza Group (LSE:DOM).
Including dividends, the fast-food chain has delivered a total return of 7,963% or 19.2% a year since October 2000. Compounding £1,250 each month at this rate for 25 years transforms a SIPP from roughly £1.2m all the way to £9m. That’s a passive income of £362,438 a year – enough for a luxurious retirement, let alone a comfortable one, even with inflation!
Still worth considering?
In 2025, Domino’s is encountering a series of problems. Economic headwinds are hampering demand while inflation ravages profit margins. It doesn’t help that competitors like Greggs are trying to encroach on the pizza market with their own offer.
However, with the upcoming rollout of a customer loyalty programme alongside an acquisitive expansion of operations in Ireland, the company appears well-positioned to support steady revenue and earnings growth once demand normalises.
There’s still a question mark over when that might happen. But with strong financials and a depressed valuation, investors seeking to build long-term retirement wealth may still want to take a closer look.
