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Matching the full State Pension of £12,548 a year from a Self-Invested Personal Pension (SIPP) requires a pot of approximately £313,700, assuming a 4% annual withdrawal rate.
But that figure changes dramatically depending on how hard the money is made to work. Here’s how the maths actually breaks down.
Should you buy Legal & General Group Plc shares today?
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What does the maths say?
The full new State Pension for 2026/27 is £241.30 per week or £12,547.60 over 52 weeks. Dividing that annual target by four possible withdrawal rates produces very different pot requirements:
Withdrawal rateSIPP pot requiredAnnual income3%£418,267£12,5483.5%£358,514£12,5484%£313,700£12,5485%£250,960£12,548
These figures assume:
Withdrawals remain fixed rather than rising with inflation
Investment fees are excluded
The SIPP pot stays invested so returns can help replenish withdrawals
Your pension withdrawal rate will be unique to you, however, a 4% withdrawal rate is widely used and there are plenty of dividend shares offering more than that right now.
Could a high-yield dividend share help?
One FTSE 100 income stock stands out to me. Legal & General (LSE: LGEN) currently pays a 21.79p annual dividend, which implies a dividend yield of roughly 7.3% as I write on Friday 31 July.
That yield could generate approximately £22,900 each year from a £313,700 holding before tax. That’s well above the £12,570 State Pension target – though concentrating an entire retirement pot in one company would expose any investor to extreme risk. It would be best as one component of a diversified portfolio, rather than a retirement plan in itself.
There’s a lot that I like about the stock. Its 2025 core operating profit rose 6% to £1.62bn, core earnings per share grew 9%, and the pro-forma Solvency II coverage ratio reached 210%.
Management announced a £1.2bn share buyback and guided for 2% dividend-per-share growth which sends a positive message to shareholders.
The group also benefits from structural demand for insurance products, workplace pensions, annuities, and pension risk transfers.
We have addressed legacy complexities, strengthened our foundations and we are driving forward our growth strategy across our core businesses.
António Simões, Chief Executive, Legal & General — Full Year 2025 Results
Could these strong cash returns remain dependable for the decades a retirement plan requires?
What could derail the income case?
Banking on a single company’s dividend yield is fraught with danger.
A dividend isn’t guaranteed, and one severe credit event, weaker asset management flows, or pension risk mispricing could hit the company’s valuation hard.
The group must also complete its restructuring without allowing costs to erode the expected benefits from the reset.
Can management keep the company’s capital ratio healthy while funding both distributions and growth?
My verdict
For planning purposes, £313,700 at a 4% withdrawal rate provides a loose guideline. A strong dividend share like Legal & General could be one for yield-hungry investors to consider.
I like the stock and the sector, and will consider buying in if the shares fall to 242p, where the implied yield would be closer to 9%.
Overall, I think diversification and long-term planning is key. After all, this isn’t the only income opportunity I’m considering as part of a well-balanced SIPP…
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Ken Hall does not hold any positions in the companies mentioned.