How much should investors put in an ISA to achieve the average salary of the United Kingdom in passive income?

Achieving financial independence through passive income is a priority for many investors in the United Kingdom. And with the average salary of the United Kingdom projected to reach £ 37,000 in 2025, I wonder how much someone needs to invest in an ISA to generate this amount.

The numbers behind the dream

To win an annual £ 37,000 annually, an investor would need around £ 740,000 in an ISA. That is based on the assumption that an investor could achieve an average dividend yield of 5%. This would mean obtaining a passive income without reducing the balance of the portfolio. While £ 740,000 may sound like a lot of money to achieve, it can be achieved. The only thing is that it takes time.

ISAS actions and actions have surpassed their cash counterparts, offering an average yield of 11.9% in the year prior to February 2025, compared to only 3.8% for ISAS in cash. This significant difference underlines the potential of shares -based investments for the generation of long -term wealth.

However, it is important to keep in mind that investing in actions entails risks, and past performance is not a guarantee of future returns. Diversification and a long -term strategy are key to mitigating these risks and maximizing yields.

The road to £ 740,000

For most investors, accumulating £ 740,000 is not a middle feat. It requires constant savings, disciplined investment and a clear financial plan. That is just the beginning. It also requires that investors invest wisely and, as Warren Buffett states, to avoid losses. In the following example, I assumed £ 500 of monthly contributions and an annualized yield of 10%. In these circumstances, it would take 26 years to aggravate £ 740,000.

However, not everyone can reach 10% per year. With an 8%growth, it would take 30 years and lower percentage yields would take even more time.

A verification of reality

While the idea of ​​winning the average salary of the United Kingdom is passively attractive, it is crucial to address this objective with realistic expectations. Market volatility, inflation and unforeseen expenses can affect investment yields. It is also the case that, assuming a constant inflation rate of 2.5% per year, £ 37,000 today will feel like approximately 19,558.47 in today's money after 26 years.

An investment to consider

Here is one of my daughter's SIPP that investors can consider.

The Monks Investment Trust (LSE: MNKs) is a worldwide -centered investment trustee administered by Baillie Gifford, with the aim of offering long -term capital growth through a diversified portfolio of growth -oriented shares. Its strategy emphasizes adaptability, investing in positioned companies to prosper amid structural and cyclic changes.

The trust approach includes the identification of companies that innovate to reduce costs or improve the quality of the service, ensuring resilience in market cycles. In the long term, Monks has had a good performance, with a total number of net asset value (NAV) of 173.2% in 10 years from March 2025.

However, the trust uses gear (loan to invest), which can amplify yields but also increases risk. If investments have a lower yield, the cost of loans can lead to significant losses, particularly during market recessions.

Despite this, disciplined risk management of the trust and the focus on long -term foundations make it an attractive option. It's something I can buy more, at least for my daughter's sipp.