As of April 2025, the median annual earnings for full-time employees in the UK is £766.60 a week, according to the Office for National Statistics (ONS). That’s a sufficiently good salary to live on but what if you could earn it as passive income?
Let’s calculate what it would take to say goodbye to that office job for good.
Working towards £766.60 a week
Based on that figure, an investor would need to bring in returns of around £39,863.20 a year. Over the past decade, the UK stock market has returned an averege 8.2% annually (based on data from Curvo.eu).
FTSE 100 average annualised returns:
- Last five years: 12.3% (78.3% total).
- Last 10 years: 8.2% (118.9% total).
- Last 20 years: 5.2% (176.5% total).
Experts recommend that retirees only withdraw 4% a year from their holdings to avoid depleting it too quickly. That means the pot would need to be worth around £996,580 (4% of 996,580 = 39,863).
Let’s say an investor starts with a £20,000 lump sum and contributes £500 a month to an ISA portfoflio. Using the 8.2% average, it would take almost 30 years to reach that goal.
For investors already in their 40s, that’s probably a bit too long. So how can investors aim to cut that time?
Targeting high-yielding stocks
Aside from increasing monthly contributions, the only way to grow the pot faster would be achieving a higher return. One way to try to do this is with a high-yielding portfolio of dividend shares.
Take the City of London Investment Group (LSE: CLIG), for example. It currently boasts an exceptionally high 7.67% yield and has a decent 12-year-long unbroken payment record.
But it’s not just a strong dividend payer. Unlike many high-yielders, it’s also supported by excellent growth credentials. The share price is up 123% in the past 20 years which, with dividends included, gives it a 20-year annualised total return of 12.11% a year.
That’s a market-beating return that could significantly raise the average overall return in a portfolio. But does the company have what it takes to keep up that performance for the next 20 years?
Taking a closer look
City of London Investment Group’s a well-established asset manager operating since 1991. With an enterprise value of just £187.4m, it’s a relatively small but reliable outfit in the fund management sector.
But like any business, it faces risks. With a heavy tilt towards emerging markets (EMs) and global close-ended funds (CEFs), it’s sensitive to volatility in EM and CEF sentiment. Not to mention any shrinkage or stagnation in the closed‑end‑fund space, which could limit profits and risk a dividend cut.
Encouragingly, funds under management (FuM) have been growing steadily. They’re up from about £7bn in June 2023 to £7.55bn in 2024 and £8bn in 2025.
Net fee income (revenue) is around £57.2m and underlying profits before tax is just over £20m. Plus, with a quick ratio of 4.97, its balance sheet is more than sufficiently healthy and it may be worth a look.
The bottom line
Building a lucrative enough passive income stream to retire on won’t happen overnight. However, by starting early and targeting high-yielding stocks, it can be a realistic goal – even for those already in their 40s. And that’s just one of many high-yielding stocks I’ve covered lately.
