Earning £5,000 a month (£60,000 a year) during retirement may sound like a far-fetched dream, but with a Self-Invested Personal Pension (SIPP), it’s far more achievable than most might think.
In fact, even someone who’s just turned 40 with zero savings can potentially turn this dream into a reality, securing a far more comfortable long-term lifestyle of financial freedom.
But how big does a SIPP need to be? And how much money is needed to build it?
Aiming for a £5,000 retirement income
As a general rule of thumb, investors should aim to withdraw no more than 4% of a retirement portfolio each year. So if the income target is £60,000 a year, then a portfolio would need to be roughly £1.5m.
Obviously, that’s a pretty substantial chunk of change. But by drip feeding £750 each month into a SIPP and earning a 10% annualised return in the stock market, this wealth-building journey can be completed in roughly 27 years – just in time for retirement.
Don’t forget, any money deposited into a SIPP receives tax relief from the government. So anyone paying the Basic rate of income tax automatically receives a 20% top up, turning £750 into £937.50. And after 27 years of compounding at 10%, a retirement portfolio will grow to £1,542,846.
| Time | Total Deposits | Portfolio Value | Retirement Income (at 4%) |
| 5 Years | £45,000 | £72,597 | £2,904 |
| 10 Years | £90,000 | £192,042 | £7,682 |
| 20 Years | £180,000 | £711,908 | £28,476 |
| 27 Years | £243,000 | £1,542,846 | £61,714 |
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.
Earning 10%+ returns
On average, the UK stock market has historically generated 8% annualised returns for investors over the long run. Therefore, in order to enjoy gains closer to 10%, investors will have to turn to a stock-picking strategy rather than an index-investing one. And when executed correctly, the results speak for themselves.
Let’s take a look at the shipping broker Clarkson (LSE:CKN) as a prime example.
Over the last 27 years, this critical shipping logistics group has evolved into a global titan. And shareholders who bought and held through this journey have enjoyed an impressive 7,174% return. But for anyone who reinvested dividends, the profit is actually a jaw-dropping 20,252%!
That’s the equivalent of a 21.8% annualised gain – more than double our target of 10%. And drip feeding £937.50 into Clarkson shares each month since March 1999 has built a £14.1m SIPP – enough to unlock £562,195 annual retirement passive income!
Still worth considering?
With its market-cap now sitting north of £1bn, Clarkson isn’t likely to deliver another 203x return between now and 2053. But that doesn’t mean the growth story’s over.
Shipping remains essential for the global economy – a structural demand driver that isn’t likely to disappear anytime soon. And in 2026, the firm’s broking and analytics solutions are proving more essential than ever as businesses seek to navigate the geopolitical chaos of the Iran war.
However, as 2025 demonstrated perfectly with a near-20% single day sell-off in March, the firm’s revenue stream remains almost entirely tied to global trade volumes. Slowdowns in emerging market demand, or tariff-induced trade disruptions, can quickly compress earnings.
This cyclical risk’s unavoidable when investing in a business like Clarkson. Nevertheless, management’s demonstrating an incredible knack for navigating such tough times, even with a leveraged balance sheet.
So for investors looking to outpace the UK stock market over the long run inside a SIPP, Clarkson may be worth mulling. And it’s not the only promising business I’ve got my eye on right now…
