How much do you need in an ISA for £20 a day of passive income in retirement?

No matter your retirement plan, a passive income stream’s worth giving some thought. The full new State Pension currently stands at £12,547 a year. That may be enough to cover basic bills, but little else.

Still, if your mortgage is cleared and healthcare needs are manageable, you may not need a fortune to enjoy life.

Even £20 a day can change the picture. That works out at £7,300 a year, or roughly £600 a month. Enough for a few meals out, short breaks, or simply peace of mind.

So how large would an ISA need to be to generate that kind of income?

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 do you actually need?

Let’s start with a simple rule of thumb: experts recommend withdrawing no more than 4% in retirement to avoid depleting savings too quickly. That £20 a day equates £7,300 a year, which is 4% of £182,500.

However, that figure isn’t set in stone. Your required pot depends on yield, fees, inflation, and how cautious you want to be. Markets don’t move in straight lines, after all.

That is why many investors aim higher. A round target of £200,000 provides a margin of safety. But how realistic is that for the average saver? If you simply saved £200 a month, it would take 1,000 months, or over 83 years, to get there. Not exactly practical.

Investing changes the equation. Assume the following dividend portfolio averages:

• 6% dividend yield.
• 3% annual capital growth.
• 2% yearly dividend growth.

With those inputs, £200 invested monthly could grow to £195,063 in around 24 years.

Interestingly, if the 6% yield holds, you would only need £121,667 to generate £7,300 annually in dividends alone. That raises a key question: is income investing the smarter route?

As Warren Buffett once said: 

“If you don’t find a way to make money while you sleep, you will work until you die.”

So where do those sleeping assets come from?

Which stocks could deliver?

To build reliable income, I focus on a few core traits:

• Consistent demand and predictable earnings.
• Sensible debt levels.
• Diversified operations across regions or services.
• A strong track record of dividends and shareholder returns.

One example that ticks many of these boxes is TP ICAP (LSE: TCAP). It operates as an interdealer broker, providing critical infrastructure for global financial markets. That niche gives it resilience and recurring demand.

Here are a few notable figures:

• 26 consecutive years of dividend payments.
• Dividend yield typically between 5.5% and 6.5%.
• Average dividend growth of 1.2% annually.
• Share price up 46.3% over five years (7.8% annualised).

This isn’t a high-growth tech story. It’s a steady, income-focused business. Still, there’s always risks. Advances in AI and automation could eventually disrupt parts of its business model, hurting profits (and the share price).

So while the income looks attractive, investors need to ask themselves: how durable is that income over the next decade?

The bottom line

Passive income in retirement is more achievable than many people think. With time, consistency, and the right portfolio, even modest contributions can grow into something meaningful.

TP ICAP, while not risk-free, ticks many boxes, so it’s worth a closer look. But don’t stop there – using this example, try to identify similar stocks to complement a diversified income portfolio.

Should you invest £5,000 in Tp Icap Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tp Icap Group Plc made the list?

Mark Hartley owns shares in TP ICAP.