Generating meaningful passive income from the stock market is one of the most popular and powerful financial goals investors pursue. And luckily for UK investors, the London Stock Exchange is home to some of the most generous dividend payers in the world.

So let’s say I want to earn £5,000 a month without having to lift a finger. How large does my ISA portfolio need to be? Let’s crunch the numbers.

How much does a FTSE 100 tracker need?

At the FTSE 100‘s current index yield of around 3.05%, an investor would need a portfolio worth around £1.97m to generate £60,000 a year, or £5,000 a month. That’s a substantial sum. And while compounding over decades can absolutely get a disciplined investor there, there’s a way to dramatically accelerate the process.

By picking individual high-yield stocks, a portfolio can earn a far more impressive return on investment. For example,  Standard Life (LSE:SDLF) currently offers a dividend yield of 6.6%. And at that rate, an investor only needs a portfolio worth around £909,000 – less than half what a FTSE 100 tracker demands.

So is Standard Life actually a good investment?

A business built for the UK’s retirement boom

As a quick reminder, Standard Life’s a specialist UK retirement savings and income business. It manages over £317bn of assets on behalf of workplace pension customers, retail savers, and institutional clients, generating income through management fees and insurance margins.

And the underlying business is seemingly in excellent health. In 2025, adjusted operating profit rose 15% to £945m while operating cash generation (a key metric for dividend sustainability) grew 5% to £1.47bn.

The retirement market’s the real growth engine here. A 14% increase in pension customers drove stronger workplace inflows, while the annuities business closed a record £1.9bn pension risk transfer deal. And looking ahead, management’s anticipating £1.1bn in underlying operating profits this year.

Is there anything to worry about?

Not everything’s straightforward. And there’s a structural risk embedded in the business model.

On paper, Standard Life actually reported a net loss of £394m last year. This stems from a legacy accounting distortion caused by insurance contract valuation rules that can diverge sharply from the underlying cash performance.

In other words, it was largely a paper loss rather than a cash one. That’s not necessarily a major issue. But it does highlight the accounting complexity of this business. And when combined with other accounting quirks, tracking the true underlying performance can become quite challenging.

In fact, this lack of transparency plays a big role in why the yield’s so high: the market’s pricing in uncertainty that could catch investors off-guard in the future.

So is it worth considering?

For investors whose primary goal is passive income, Standard Life deserves a closer look, in my opinion.

The dividend’s well-covered by cash generation, the retirement market tailwind is structural and long-dated, and the yield’s more than double a FTSE 100 tracker currently offers.

Is there uncertainty through complexity? Absolutely. But that complexity is also what’s behind a generous yield. And for investors willing to dig through the numbers, I think Standard Life shares could prove quite lucrative over the long run.

What income stock do we like better than Standard Life right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Zaven Boyrazian does not hold any positions in the companies mentioned.