I don’t know about you, but I don’t think the £241.30 weekly State Pension is enough to get comfortably by. That’s why I’m considering a second income for retirement.
By trimming my expenses and saving just 10% a month, I aim to start building a decent investment pot via the stock market. Plus, by using a Self-Invested Personal Pension (SIPP) or ISA, any gains made on investments below £20,000 a year will be free of tax.
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.
How much income are we talking about?
For an investor earning a monthly UK salary of £2,600, a £260 monthly investment could compound nicely. Using the average FTSE 100 return of 9.5%, that could grow to £186,825 in 20 years. Based on the recommended 4% retirement withdrawal rule, that would bring in an extra £7,473 a year.
Got more time? Punch it up to 30 years and it could grow to £533,033, drawing down a much, much healthier £21,321 a year!
What stocks to look for?
The most popular income shares tend to share a few similar features:
- Long records of paying dividends, because that shows discipline and resilience.
- Strong cash coverage, so the dividend is backed by real money, not just accounting profits.
- Manageable debt, because heavy borrowing can put pressure on payouts when times get tough.
The aim is not just a high yield. It is a payout that can keep going through good years and bad. So what is one example of a dividend stock that fits that brief?
For reliability, the real estate investment trust LondonMetric Property (LSE: LMP) is one of my favourites.
Why LondonMetric Property?
LondonMetric looks appealing because it combines income with a long record of consistency. The current yield is 6.5% and it has an 18-year unbroken dividend track record.
Its most recent results also showed earnings and cash flow covering the dividend, which is exactly what income investors want to see.
A few points stand out:
- Dividend yield: usually between 5%-7%.
- Dividend growth: the annual dividend increased to 12p in the year to 31 March 2025, up 17.6%.
- Coverage: the dividend was 109% covered by earnings in FY2025, and the half-year update said it was 111% covered.
- Cash generation: net rental income rose sharply, helped by a strong portfolio and active management.
There are risks, of course. The balance sheet is not spotless, with liabilities exceeding current assets, so investors should not treat it as risk-free. Debt is supported by equity, but a downturn in the UK property market would still be a problem. That is why even good income shares should be just one part of a wider retirement plan.
Retirement income plan
A practical approach is to automate the process. If you save 10% of your monthly pay into an ISA or SIPP, then reinvest dividends for years, you give compounding a real chance to do its job.
Over time, that income stream may help pay bills, cover travel, or simply reduce pressure on your pension. For many investors, that kind of second income is what makes retirement feel a lot more comfortable.
On balance, I think LondonMetric Property is worth considering for income investors because it offers a solid yield, a long dividend record and earnings support.
It isn’t flawless, but as part of a wider retirement portfolio, it could complement the many other dividend shares I’ve covered recently.
