A £20,000-a-year passive income from a Stocks and Shares ISA implies a portfolio of roughly £500,000 based on a typical 4% income drawdown rate.
That’s a substantial figure — and for most investors, it quickly reframes the challenge. This is no longer just about saving steadily into an ISA, but about the type of investments needed to build meaningful long-term income power.
Rather than staying at the level of theory, I’ve highlighted two UK stocks I believe could be worth considering for investors aiming to move towards that kind of income target over time.
Cash king
Fresnillo (LSE: FRES) is not a typical FTSE 100 stock. As a leveraged play on precious metals, it can generate extraordinary cash when conditions are favourable.
FY25 showed that clearly. Revenue rose 27.6% to $4.6bn, EBITDA (earnins before interest, tax, depreciation, and amortisation) jumped more than 80% to $2.8bn, and profit before tax nearly tripled. Earnings per share increased more than fourfold year on year.
Importantly, this was achieved with average realised prices of around $43 for silver and $3,500 for gold. Despite recent weakness, spot prices remain well above those levels.
That matters because Fresnillo’s earnings power is highly sensitive to metal prices. When they move, profits don’t just rise gradually — they accelerate sharply.
A structural boost for metals
The longer-term backdrop for precious metals still looks supportive. Silver demand is driven by industrial uses such as solar, EVs, and electronics, alongside its role as a monetary hedge. At the same time, supply remains constrained due to long mine development timelines.
Gold is also benefiting from central bank demand and fiscal uncertainty, supporting the case for structurally higher prices over time.
Of course, this is not a low-risk business. Mining is operationally sensitive, and rising energy costs, falling grades, or production disruptions can quickly pressure margins even in strong price environments. Regulatory risk in Mexico is another factor investors cannot ignore.
But despite that volatility, I still think Fresnillo offers exposure to a structural precious metals trend that is far from over. That’s why I view it as one to consider alongside other long-term ISA holdings
Fallen giant
Diageo (LSE: DGE) has been one of the FTSE 100’s more painful large-cap performers in recent years.
But the key question for investors is whether this is a structural deterioration in the business — or simply a cyclical reset being mispriced by the market.
What matters is that underlying consumption trends have not collapsed. Consumers are still drinking, but they are trading down and moderating their spending rather than exiting the category entirely. That points to cyclical pressure, not a permanent demand shift.
Premiumisation — one of Diageo’s key long-term growth drivers — is also not broken. High-end brands such as Johnnie Walker, Tanqueray, and Don Julio continue to perform well, even if growth has become more uneven across price points.
In response, the group is adjusting its portfolio to meet demand where it’s strongest. This includes smaller pack formats and faster-growing ready-to-drink categories. That’s more about repositioning than strategic change.
The broader takeaway is that the market may be overpricing short-term weakness while underestimating the resilience of the underlying brand portfolio.
For long-term investors, that combination of cyclical pressure and structural strength is exactly where value opportunities tend to emerge — which is why I see Diageo as one to consider.
