Investing in a Self-Invest Personal Pension (SIPP) is a fantastic tool when aiming to secure long-term retirement wealth. And with deteriorating public finances leaving the future of the State Pension up in the air, not taking steps to build an extra income stream could prove disastrous.

Right now, the UK State Pension generates £241.30 a week, or £12,547.60 a year. So how big does a SIPP need to be to generate the equivalent?

What do the numbers say?

When it comes to retirement planning, everyone’s situation is a little different. But extensive research has shown that withdrawing no more than 4% of a portfolio’s value a year is the right balance between generating an income and ensuring wealth continues to compound in the background.

So following this 4% rule, a £12,547.60 passive income will require a SIPP portfolio to be worth roughly £313,690. For reference, that’s more than double the average UK private pension pot of £137,800 in 2025.

How to get to £300k+

Let’s say an investor’s starting from scratch today and can only comfortably spare £500 a month from their salary. After that money is deposited into a SIPP, it automatically gets topped up to £625 by the government through 20% tax relief.

This money can then be invested in something as simple as a low-cost index fund. And assuming the UK stock market continues to generate its historical 8% average return, an investor would have built a nest egg worth £332,739.35 in 19 years.

But what if £12.5k passive income isn’t enough? That’s where stock picking can come to the rescue.

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 to earn even more

Picking stocks definitely requires more knowledge and discipline. Yet it also opens the floodgates to potentially game-changing returns. And anyone who’s been investing in Melrose Industries (LSE:MRO) over the last 19 years has experienced this thrill first-hand.

Even when buying in 2007, right before the global financial crisis, Melrose shares have still delivered a staggering 2,079.7% total return to date. That’s the equivalent of earning 17.6% a year, transforming £625 a month into £1,135,758.02 – enough to generate a £45,430.32 passive income!

Is Melrose still worth considering in 2026?

Back in 2007, Melrose was an engineering conglomerate that acquired struggling businesses and focused on turning them around. Today, it’s a very different beast, transformed into an aerospace pureplay enterprise, supplying industry titans such as Boeing, and Airbus, among others.

This transformation has only recently been completed. And as such, the group’s financials are still pretty complicated with murky accounting practices. Nevertheless, when digging through the weeds, the firm emerges as an enormously profitable enterprise with an impressive growth runway.

There are still some valid weak spots. Supply chain constraints created by the current geopolitical landscape are creating some annoying headaches – a problem only made worse by the additional disruptions to the civil aerospace sector. 

With a large chunk of earnings coming from its profitable aftermarket services segment, prolonged disruptions to its core market could result in Melrose falling behind on key targets. Nevertheless, with the shares trading at an undemanding valuation, I think there’s still a compelling long-term growth opportunity here.

That’s why I’ve already added Melrose to my SIPP. And it’s not the only stock on my radar right now.