Unlike a normal trading account, the government tops up your contributions, and unlike an ISA, the main goal is retirement.

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.

A new tax season is a good time to think about a SIPP, and this month could be particularly good. Here’s why…

A correction as an opportunity

Right now, the UK market has just come through a rough period. The FTSE 100 dropped from around 10,900 points down to 9,600 in a matter of weeks, briefly entering a correction. 

Naturally, this can be scary. However, for long‑term SIPP investors, it can also be an opportunity to grab some quality companies at lower prices.

If you drip feed contributions each month, lower prices give that extra boost, netting more shares for the same cash. Over 20 or 30 years, that can make a huge difference.

Growth vs income in a SIPP

In a SIPP, it usually makes sense to blend growth and income shares. Growth stocks aim to increase in value faster than the market. Income stocks pay regular dividends that you can reinvest while you are working, or later withdraw to help fund your retirement.

Reinvested dividends are powerful: more shares = more dividends. That’s compounding at its finest.

This is why I’m a big dividend fan. But with retirement in mind, it pays to be extra critical. I want businesses that are likely to still be here in 20 or 30 years’ time.

For example, Unilever, GSK and National Grid all fit that criteria. So does one of my favourite options to consider for a SIPP: F&C Investment Trust (LSE: FCIT).

The long‑term bet

F&C Investment Trust has been around since 1868, making it the oldest collective investment scheme in the world, with a history stretching close to 158 years. The fund holds more than 400 companies worldwide, plus a slice in private equity.

Since 2006, it’s returned around 554% in total – a 20% annualised return. Meanwhile, it increased its dividend for more than 50 consecutive years, including a 6.1% rise in 2024 to 15.6p per share. Today, it trades on a discount to net asset value (NAV) of around 9%, decently below the value of its underlying holdings.

Still, as an equity fund, it’s at risk if global markets fall sharply. Plus, it uses some gearing (borrowing to invest), which can magnify losses in a downturn.

Macro‑wise, it benefits from broad global exposure, which helps smooth out volatility. With a long track record through wars, crashes, inflation spikes and rate cycles, it fits my SIPP stock criteria.

Final thoughts

Using a market dip to tuck quality assets into a SIPP can be a smart move. It combines tax relief with lower entry prices for decades of compounding – a powerful mix for anyone planning their future retirement.

For passive, hands‑off SIPP investors, there’s a lot to be said for funds and trusts with proven staying power. And few have a history as long and steady as F&C Investment Trust.

But for those willing to be more active, today’s correction has also thrown up plenty of individual FTSE 100 shares trading at what look like bargain prices.

The post This stock market correction could be a rare opportunity to supercharge a SIPP appeared first on The Twelfth Magpie.

The trick is not to start with wild bets, but with steady, boring companies that don’t swing around too much and have long, predictable histories. This way, you can get a feel for how things work before taking on any real risk.

What makes a stock ‘safe’?

No investment is 100% safe, but some are naturally calmer than others. Large companies with steady profits and high demand tend to move less than smaller, speculative firms.

With larger market-caps, one bad headline doesn’t move the price as much. Earnings grow steadily and they usually operate in areas with consistent demand. Think banking, healthcare, retail.

Here are three stocks to consider. They’re not risk‑free, but they can be a gentle way to get used to the ups and downs without feeling sick every time you check your portfolio.

Lloyds: a UK ‘thermometer’

Lloyds (LSE: LLOY) is one of the UK’s biggest banks and a decent starter stock because it tends to move with the wider British economy. If the UK’s doing well, Lloyds usually is too, so it acts like a quick ‘temperature check’ on the market.

In 2025, income grew 8% and earnings increased from 6.3p to 7p per share, which shows fairly steady progress. On top of that, it boosted its dividend to 3.65p per share for 2025, a 15% increase. Add share buybacks and that’s a strong signal for income‑focused investors.

The flip side is that it’s very exposed to the UK. If interest rates fall or the housing market struggles, bank profits can get squeezed and the share price can wobble.

F&C Investment Trust: simple diversification

F&C Investment Trust (LSE: FCIT) is like a ready‑made basket of shares rather than a single company. It holds a large portfolio of global stocks, so one bad egg doesn’t ruin the whole omelette.

The main risk is that, in a big global downturn, markets tend to fall together. So the trust’s share price could still drop sharply despite its diversity.

But the trust has a market-cap around £5.9bn and currently trades at roughly an 8% discount to its net asset value (NAV). That means investors could snap it up for less than the combined value of its assets.

It’s also grown its dividend steadily over many years, with a yield of around 1.3% recently. That’s backed by strong earnings coverage from its many underlying firms.

AstraZeneca: healthcare heavyweight

AstraZeneca‘s (LSE: AZN) currently the largest company in the FTSE 100 by market-cap, at roughly £240bn. That makes it a heavyweight anchor for many UK portfolios.

The risk here is less about people stopping their medicines and more about drug trials failing, pricing pressure, or patents expiring. As a global business, it’s also affected by exchange rates and health‑policy changes in big markets like the US and Europe.

But it’s still a crucial business. It sells medicines for serious conditions including cancer and heart disease, where demand’s usually stable regardless of the economic cycle. 

Earnings and dividends have grown over time, with the dividend yield around 1.7% and a payout ratio just below 50%. That leaves more than enough earnings to reinvest in the business.

The post Get started on the stock market: 3 ‘safe’ shares for beginner UK investors to consider appeared first on The Twelfth Magpie.

United Utilities, BAE Systems, Supermarket Income REIT, Aviva, and F&C Investment Trust (LSE:FCIT) are just five rock-solid dividend shares I like. I believe they could deliver a large and reliable dividend income for years to come.

Want to know why?

Flowing dividends

United Utilities has raised annual dividends for 14 straight years. For this financial year, its dividend yield is a healthy 4.5%.

The water supplier’s defensive operations and reliable cash flows have underpinned this proud dividend record. And with interest rates falling, the outlook is improving as its large borrowing costs fall.

There are regulatory risks, and especially following recent scandals around sewage dumping. Yet in my view it’s still a more dependable dividend stock than most other UK shares.

Another FTSE hero

The stable nature of defence spending’s driven BAE Systems’ annual dividends higher for 21 consecutive years. With Western countries rapidly rearming, I think we could be entering a new era of robust payout growth.

Industry supply chains remain a problem for the aerospace sector. Competition is also fierce. But the earnings and dividend picture remains robust in my view, underpinned by the FTSE 100 company’s relationships with the UK which is leading the defence boom.

The dividend yield on BAE shares is 2.3% for 2026.

Market leader

Supermarket Income REIT must — under real estate investment trust rules — pay at least 90% of annual rental profits out in dividends. This can make passive income more stable than with many other UK shares.

There are other supportive levers, like the trust’s focus on the ultra-defensive food retail market, and its blue-chip tenant base which includes Tesco and Sainsbury‘s. This greatly reduces threats like rent defaults and vacant properties.

Supermarket Income has raised dividends for seven straight years. Its forward dividend yield is 7.6%.

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.

Bouncing back

Balance sheet rebuilding in the 2010s has resurrected Aviva as a top dividend stock. Shareholder payouts have risen sharply in recent years, and for 2026 its dividend yield’s an impressive 6%.

While it’s sensitive to economic conditions, the FTSE company’s huge general insurance operation helps to offset weakness elsewhere. And considering its deep cash reserves, I don’t expect dividends to stop skipping higher — its Solvency II capital ratio is 177%.

I expect Aviva’s dividends to keep rising, as demographic changes drive demand for financial services.

Top trust

The F&C Investment Trust has one of the best dividend records of any London-listed stock. Annual dividends here have risen every year since 1970.

That incredible performance reflects the quality of the trust’s management and its diversified approach. Today, its £6.7bn portfolio is invested in 363 separate global shares. These span a wide range of regions and sectors, which better protect investors from concentrated shocks that can impact dividends.

What’s more, with exposure to both economically sensitive and defensive sectors, it provides stability alongside potential for payout growth.

A focus on shares leaves F&C vulnerable to stock market vulnerability. But its dividend record still makes it worth considering to supplement the State Pension. The forward dividend yield here is 1.4%.

The post 5 top dividend shares to consider to supplement the State Pension! appeared first on The Twelfth Magpie.

Picking the best stocks to buy comes with some work, though. Only those committed to carefully researching shares and devising a sensible investing strategy typically enjoy a robust income year after year.

Let’s get things started with three simple rules I use myself. I’m confident they could eventually turn a £20,000 lump sum investment into a regular £33,286 passive income.

1. ISA benefits

The first thing I’ve chosen to do is cut out HRMC. They’re after both my trading gains and dividends, and also have their eyes on my portfolio drawdowns.

This is why opening a Stocks and Shares ISA can be critical. These accounts prevent HMRC from charging income tax on any withdrawals you make. And by stopping capital gains tax and dividend tax, investors have more money working for them and compounding over time.

The good news is these products also have a healthy £20,000 annual allowance. This is more than enough for almost all Britons (only 7% of people max out their ISAs each year).

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.

2. Growth, value, dividends

When building one’s portfolio, it’s important to aim for a balanced range of growth, value, and dividend-paying stocks.

Growth shares can deliver strong capital gains over time as profits rise and share prices increase. Value shares can also enjoy stunning price appreciation, albeit in a different way. They can re-rate over time as investors realise their cheapness, benefitting early buyers.

Dividend stocks, meanwhile, can provide a steady flow of income that can be reinvested to boost compound returns. What’s more, dividend shares — unlike growth and value stocks — can help a portfolio deliver a positive return even during stock market downturns.

3. Diversify for strength

Equally critical is to build a portfolio that spans spanning different regions and sectors. Investment trusts like F&C Investment Trust (LSE:FCIT) can be simple yet highly effective ways to achieve this.

This FTSE 100 trust has delivered 54 straight years of dividend increases, illustrating the stability it offers. But that’s not all. Its share price has risen at an average annual rate of 6% over the past decade.

F&C manages roughly £6.6bn worth of assets, including more than 350 global equities. Holdings are as varied as Nvidia and Amazon, right through to HSBC, Siemens, and Pfizer.

Like any stocks-focused trust, performance can suffer during broader stock market downturns. But as we’ve seen, its commitment to share investing also helps it tap into the lucrative long-term returns equities can bring.

Targeting a £33k income

With a diversified portfolio including trusts like this, I believe it’s quite possible to make an average yearly return of 8%. At this rate, someone investing £500 a month could come out with a healthy £475,513 after 25 years.

This could then be invested in 7%-yielding shares to target an annual second income of £33,286.

The post Want to turn £20k into a £33,286 second income? Here are 3 steps to get started appeared first on The Twelfth Magpie.

These benefits are worth special consideration today as speculation of a market downturn grows. Predicting the timing of a market downturn is a notoriously difficult business. But it pays to be prepared.

Of course investment trusts aren’t just a tool to manage risk. Many top trusts have successfully leveraged the expertise of their managers down the years, delivering returns that outperform the broader market.

With this in mind, here are three to consider for today’s uncertain landscape and beyond.

2 top contenders

The Golden Prospect Precious Metals (LSE: GPM) trust is perhaps the ultimate safe-haven asset in tough times. Yet its returns have been anything but conservative — over the past decade, it’s delivered an average annual return of 15.1%.

That smashes the corresponding returns of both the FTSE 100 and FTSE 250 indexes, of 8.5% and 5.7%, respectively.

Golden Prospect’s thrived as gold prices have gone from strength to strength. The business invests in 70 different gold producers, which spreads out — if not totally eliminates — the operational risks that come with metals mining.

Gold miners typically enjoy stable costs, which means even small gold price changes can drive profits sharply higher. A bright outlook for bullion prices suggests this trust could continue to deliver.

The Scottish American Investment Company is another top trust to consider, in my view. The annual return here is lower but still an impressive 9.7%.

Roughly 90% is tied up in a range of global shares, from technology stocks like Microsoft and Apple to insurers like Admiral and drugs developers including Novo Nordisk. It holds 62 companies in total, allowing it to harness the power of the stock market but in a way that effectively spreads risk.

On top of this, Scottish American holds a number of classic defensive assets to give it stability across the economic cycle. This includes property alongside government and corporate bonds. But as with other shares-focused trusts, it can still experience volatility at times.

A trust that’s on my radar

The F&C Investment Trust (LSE:FCIT) is one I’m currently considering for my own portfolio. The average annual return here is 11.8% over the last 10 years.

It holds an even higher number of global companies, at 356, which provides still superior diversification. Furthermore, it also holds a large contingent of US tech shares, including the world’s first $4trn company Nvidia.

On the downside, this can leave it more exposed to downturns than other diversified trusts, given the cyclical nature of tech demand. But as its stunning long-term returns show, it’s an approach that can deliver robust growth.

F&C’s record of 54 years of sustained dividend increases underline its strength irrespective of economic conditions. On balance, I think it could — like those other investment trusts — be one of the best diversified assets to consider right now.

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The Bank of England recently cautioned that if confidence in artificial intelligence or the US Federal Reserve weakens, a “sharp correction” could follow. Similarly, the International Monetary Fund worries that markets could be overvalued relative to fundamentals, making them vulnerable to steep drops if sentiment sours.

So I plan to reallocate around £1,000 of funds – and these are the UK shares I’m considering.

A high street staple

One company that’s always held up reasonably well is Tesco (LSE: TSCO). While supermarkets aren’t glamorous, their defensive nature appeals in rough times. In 2025, it generated a total return of about 25% with a dividend yield currently sitting around 3.2%.

While that yield is not particularly high, it’s well covered by cash and earnings with a relatively consistent payout history. As a long-time customer myself, I believe its brand strength and scale provide structural protection. People always need food and grocery shopping even in weak economic times.

Tesco has warned in the past about the risks of higher costs and competitive pressure from rivals. Intense discounting by competitors could put pressure on its margins and threaten profits. And if inflation or input costs surge further, it could squeeze its capacity to sustain dividend growth.

Still, earlier this month, it raised its full-year profit outlook following a stronger summer performance. So even as the FTSE 100 slips from all-time highs, Tesco looks solid.

Strength in diversity

The second share I’ve been eyeing for some time is F&C Investment Trust (FCIT). It’s a highly diversified investment trust that provides exposure to a wide mix of sectors globally, which adds extra defensiveness.

The trust holds about £6.5bn in assets, with top holdings leaning heavily towards the usual US tech giants like Microsoft, Apple and Nvidia. Still, it’s far more diversified than many other funds, with 14.5% in European stocks, 10.1% in emerging markets and 10.5% in private equity.

Despite this, it still carries risk tied to global equities and concentrated tech exposure. If US tech underperforms, F&C could be hurt. Plus, valuation discounts to net asset value or changes in sentiment can lead to price swings not necessarily tied to fundamentals.

It has modest net gearing of roughly 4% and a total ongoing expense of 0.45%.

One extra factor that adds credibility is its long history, dating back to 1868. Despite an average 10-year annualised return of only 6%, it appears quite resilient and tends to recover quickly from downturns.

Final thoughts

With £1,000 to reallocate, shifting some capital towards these kinds of defensive names may offer a balance between income and capital preservation. Together, they offer me exposure to a trusted UK retail brand and global diversification to smooth out market volatility.

For now, the majority of my portfolio remains in income-oriented stocks. But when markets look jittery, I think it’s worth considering defensive shares like Tesco and F&C.

The post With £1,000 to spend, here are 2 UK shares I’m considering in October appeared first on The Twelfth Magpie.

Here’s how even someone with less than 20 years to retirement can target a decent income in later life.

Compound benefits

There are some drawbacks to the SIPP compared with, say, the Stocks and Shares ISA, another popular product among long-term savers and investors.

Both of these tax wrappers shield savers and investors from capital gains and dividend tax. But with the ISA, no income tax is due when drawdowns are made. SIPP users pay a penalty if they make withdrawals before the age of 55 (rising to 57 in 2028). ISA users face no such penalties

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.

However, such age restrictions may not be problematic for those not looking to withdraw before State Pension age. What’s more, the benefit of tax relief on SIPPs — which ranges from 20% to 45% — may still make this route more financially advantageous over the long term.

A £25k+ retirement income

This is because tax relief accelerates the rate of compound growth, giving pension contributions more time to grow exponentially.

Let’s say we have a 50-year-old who invests £500 a month. They are a higher-rate taxpayer, giving them 40% tax relief. They also manage to secure a 9% average annual return.

Based on this, they’d have a retirement fund of £335,243 by the time they reach their State Pension age of 67. Without this tax relief and the boost to monthly compounding growth, they’d have a far lower £239,459.

That’s a difference of £95,784.

Combined with the State Pension, they’d have a total annual retirement income of at least £25,383. That’s based on a 4% annual drawdown rate on their SIPP, combined with the current full state benefit of £11,973 a year.

A FTSE 100 wealth builder

This is a realistic target, in my opinion, given that a 9% annual average rate of return is between the 8%-10% long-term average that share investing’s historically provided.

Such returns are never guaranteed. After all, stock markets can go down as well as up. But investors can harness the wealth-growing power of share investing with a diversified portfolio of stocks.

Investment trusts like the F&C Investment Trust (LSE:FCIT) can provide this diversification simply, cheaply and effectively. Indeed, this FTSE 100 trust has delivered an average annual return of 11.7% over the last decade.

F&C has been in existence since 1868, and holds approximately 400 global shares in its portfolio. This wide geographical footprint, added to broad sector exposure, means the fund spreads risk while simultaneously providing investors access to many different investment opportunities. This makes it worth serious consideration in my view.

Major holdings range from semiconductor manufacturer Nvidia and e-retailer Amazon, to credit card provider Visa and insurance AIG. Its high weighting of US tech shares makes it vulnerable to rising sector competition from China. But it still creates significant long-term growth potential as the digital economy rapidly expands.

Trusts like this mean even investors who are late to the party still have a great chance of building a healthy retirement fund.

The post No savings at 50? Here’s how a SIPP could deliver a £25k+ retirement income appeared first on The Twelfth Magpie.

With the Stocks and Shares ISA and Cash ISA — the two most popular products in this range — Britons can save or invest up to £20,000 a year. By doing so, they don’t have to pay a single penny in tax on interest, capital gains, or dividend income.

But the difference in what users of these products can expect to make over time varies considerable for each one. With this in mind, here’s how an individual targeting a £40,000 passive income in retirement could hit this ambitious target.

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.

Prioritising UK and US shares

Before I begin, I’d like to state that I own one of each of these ISAs. In fact, I also hold cash savings in a Lifetime ISA (annual allowance: £4,000). This gives me an added tax relief boost, which for me is worth the age-related withdrawal restrictions that the Cash ISA and Stocks and Shares ISA don’t have.

But I don’t treat these accounts equally. By some distance, the majority of my surplus cash is parked in my higher-returning shares ISA. I only put money in those other two ISAs to manage risk (and in the case of the Cash ISA, to give me access to emergency cash).

Since 2015, the average annual return on the FTSE 100 and FTSE 250 indexes is 7.2% and 5.1%, respectively. For US shares listed on the S&P 500, the return is even higher at 13.1%.

By comparison, the average savings account interest rate over the period sits way back at 1.2%.

Targeting a £40k+ income

Based on this, an investor looking to make an annual passive income above £40k in retirement could consider putting 80% of their cash in UK and US shares, and the remaining 20% in stable savings accounts.

If they invested £500 monthly, they’d have a pension pot of £703,589 if investing for 30 years. That’s assuming they achieve an 8.5% average return on their Stock and Shares ISA — mimicking the long-term average of the FTSE 100, FTSE 250 and S&P 500 — and 1.2% on their Cash ISA.

This fund then invested in 6%-yielding dividend shares would provide a subsequent £42,215 retirement income (although that’s in no way guaranteed).

A top trust

One cheap and easy way to target the wealth-building power of UK and US shares could be to buy an investment trust. The F&C Investment Trust (LSE:FCIT) is one such financial vehicle to consider for this strategy.

North American equities dominate the portfolio, comprising 62.7% of total holdings. Notably it enjoys high exposure to the ‘Magnificent Seven’ tech stocks Nvidia, Apple, Microsoft, Alphabet, Tesla, Meta and Amazon too, providing it with excellent growth potential.

Elsewhere, UK shares form its second-largest regional weighting, comprising 9.7% of the whole portfolio. Major names here include FTSE 100 stocks HSBC, Vodafone and RELX.

As with other share-focused trusts, F&C is vulnerable to periods of broader stock market weakness. But its powerful long-term performance helps soothe (if not eliminate) any fears investors may have.

Since 2015, it’s delivered an average annual return of 11.6%. If this continues, an investor here could hit their £40k passive income target far sooner.

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According to Hargreaves Lansdown, confidence in the UK economy has slipped 16% among its clients this month. It says that “weak GDP growth, mixed messaging on fiscal plans, and wavering political clarity post-election have all added to investor caution“.

Troublingly, it added that “confidence in the UK stock market also slipped at a similar level“.

Two shares on my watchlist

While a rising tide lifts all ships, the opposite is also true. So, if the broader FTSE 250 drops sharply, it’s possible that quality companies with limited or no exposure to the UK could fall heavily alongside more exposed firms.

This could give eagle-eyed investors a chance to nip in and grab some bargains. If the UK stock market does slump in the weeks and months ahead, here are two top mid-cap shares I’ll consider snapping up.

Top trust

Finsbury Growth and Income Trust is already on my radar, even before a possible stock market correction. It trades at a 7.7% discount to its net asset value (NAV) per share.

Helmed by legendary fund manager Nick Train, it holds shares in 21 (mainly UK) shares. These are multinationals with strong balance sheets, market-leading positions, and proven business models. The portfolio includes names like Experian, Sage Group, London Stock Exchange, and Unilever.

Its high selection of tech stocks deserves close attention from investors, in my opinion. On one hand, it may leave the trust especially vulnerable during a global economic downturn. But it also provides enormous long-term growth opportunities thanks to phenomena like artificial intelligence (AI) and cloud computing.

A high-performing bank

In my view, TBC Bank (LSE:TBCG) is already one of the FTSE 250’s greatest value stocks. It’s why the business already commands a spot on my investing watchlist.

It trades on a forward price-to-earnings (P/E) ratio of 6.6 times, making it cheaper than other emerging market banks like HSBC and Banco Santander. And its dividend yield for 2025 is a sector-beating 5.5%.

Emerging market stocks can expose investors to regional risks not seen in the likes of the UK. In the case of TBC, ongoing political uncertainty in its key market of Georgia poses a potential threat to earnings.

That said, emerging market stocks can also offer significant growth opportunities as wealth levels in these economies rapidly rise. And TBC, which is Georgia’s largest retail bank, is capitalising on this opportunity to the fullest.

Latest financials showed operating income and net profit up 23% and 5.2%, respectively, in the first half. City analysts expect annual earnings here to leap 15% year on year in 2025, a trajectory that also leaves TBC trading on a forward price-to-earnings growth ratio of 0.5. Any reading below one implies that a share is undervalued.

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Also, unlike the Self-Invested Personal Pension (SIPP), there are no rules on when users can start drawing down from an ISA. This opens up the possibility, then, of a super-early retirement for some.

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.

Compounding for wealth

Obviously, the earlier an individual gets started on their investing journey, the better the chances are of generating long-term wealth. That’s because of compounding—the process where investment gains themselves begin to generate their own gains.

In short, the longer one’s money is invested, the more pronounced the eventual returns become. Here’s how a £5,000 ISA could grow over a quarter of a century, based on an average annual return of 9% a year:

As you can see, our investor could end up with more than £38,000 in gains — more than seven times their original investment — without adding a single penny more.

Even so, this is unlikely to prove anywhere near enough what an ISA investor will need to take a luxurious early retirement. If invested in 6%-yielding shares, a rough £43,115 portfolio would throw off just £2,586.90 a year in passive income.

A £500k+ ISA

This is why regular additional investment is so important. If our ISA user can top up with another £500 each month, they could have a supersized portfolio worth £572,284.25 after 25 years.

That’s a pretty realistic target in my view. It’s actually slightly below the £514 that the average Brit invests each month, according to Shepherds Friendly.

With a Stocks and Shares ISA of this size, our investor could have an annual passive income of more than £40,000 — £40,059.90, to be exact — if invested in 7%-yielding dividend shares.

Trust exercise

Investment trusts like F&C Investment Trust (LSE:FCIT) can be excellent choices to consider for crafting a diversified and high-performance portfolio. This particular FTSE 100 one — which has been delivering strong returns since 1868 — has produced an average annual return of 11.3% over the past decade.

That’s better than the 9% needed to create our £40k second income-generating ISA portfolio.

F&C invests in roughly 350 companies, providing strength through exposure to dozens of companies (35 in all) and industries. I particularly like its substantial holding in technology stocks like Nvidia and Microsoft. Sure, this can leave it more vulnerable to economic downturns. But it also provides significant long-term growth potential as themes like artificial intelligence (AI) and cloud computing take off.

Our £40k passive income calculation is just an example, of course. But with a diversified portfolio of UK and overseas shares, I think it’s a realistic target. Heck, the large number of Brits living off supersized ISAs proves how regular investing can create significant wealth.

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