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Image source: Getty Images<\/p>\n
April is fast approaching, and with it comes a tasty 4.8% bump to the UK State Pension. Retirees will now receive up to \u00a3241.30 a week, or \u00a312,548 a year. And while that\u2019s certainly nothing to scoff at, it nonetheless still falls short of what\u2019s needed for a comfortable retirement lifestyle.<\/p>\n
The good news is that by making some smart decisions today, investors can use tools like a Self-Invested Personal Pension (SIPP) to change that. And with enough time, drip feeding even as little as \u00a3500 a month can potentially unlock an income double what the government provides.<\/p>\n
Here\u2019s how.<\/p>\n
Building stock market wealth<\/p>\n
To double the 2026 State Pension, a portfolio needs to generate a passive income of \u00a325,096. And following the 4% withdrawal rule, that means a SIPP needs to be worth just shy of \u00a3630,000.<\/p>\n
Needless to say, that\u2019s not something most people have lying around. But by leveraging the power of stock market compounding<\/a> alongside the tax relief benefits of a SIPP, drip feeding \u00a3500 each month is all that\u2019s needed, even for a 40-year-old starting from scratch today.<\/p>\n Let\u2019s say an investor is in the 20% income tax bracket. Whenever \u00a3500 is dropped into a SIPP, the government automatically tops up this position to refund any income tax previously paid. And the result is that this \u00a3500 is transformed into \u00a3625 of investable capital.<\/p>\n Taking that \u00a3625 each month and investing it at the stock market\u2019s average total return of 8% a year is what enables a portfolio to steadily compound over time.<\/p>\n After 26 years of consistent saving and investing, a pension pot will surpass the \u00a3630,000 threshold. And for stock pickers who manage to beat the market and average an 12% annualised return, this timeline shortens to around 20 years.<\/p>\n 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.<\/p>\n Finding market-beaters<\/p>\n Earning a 12% annualised return for two decades is no easy feat. But it\u2019s not as impossible as most believe when investors learn to identify high-quality companies trading at discounted stock prices. And shareholders of Howden Joinery (LSE:HWDN<\/a>) have learned this first-hand.<\/p>\n Over the last 20 years, the fitted kitchen specialist has leveraged its highly cash-generative business model to steadily expand and outmanoeuvre competitors. The result has been a staggering 1,613% total return since February 2006 \u2013 the equivalent of 15.3% a year!<\/p>\n To put that in perspective, anyone who was drip feeding \u00a3625 a month at this rate of return for the last two decades doesn\u2019t have \u00a3630k today, but rather \u00a3976k.<\/p>\n Still worth considering?<\/p>\n