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The full UK State Pension currently stands at £230.25 a week, or £11,973 a year. While that’s better than nothing, it still falls short of the estimated £13,400 needed to cover the minimum expenses of retirement.
Sadly, I doubt things will get any better. With an ageing population, the State Pension’s financial burden on the national budget is rising.
Today, the eligibility age stands at 66 following an increase in 2021. Between 2026 and 2028, it will once again be hiked to 67. And while the original plan to raise the age to 68 was scheduled for 2046, there are growing rumours this timeline could be accelerated to the 2030s in an upcoming review.
That’s why I’m taking matters into my own hands by investing in UK shares.
My retirement strategy
My retirement portfolio is designed to do one simple task – generate sustainable passive income to fund a comfortable pensioner’s lifestyle. As such, it exclusively contains dividend-paying stocks.
However, while most income investors are focused on the yield, my attention’s actually on a firm’s cash flow-generating capabilities. That’s because in the long run, a firm with expanding cash flows can also consistently increase its dividends over time. And when left to compound, an initial modest yield can grow into a monstrous, sustainable payout.
A pick from my portfolio
There are the proven giants such as British American Tobacco and Halma sitting on impressive 25-year-plus dividend hiking streaks. But with many of these businesses having already reached maturity, the growth rates are pretty lacklustre in low single digits.
That’s why for my portfolio, I’m hunting for the companies near the beginning of their dividend hiking streak. And one of my favourite picks in this arena might be a bit surprising. It’s Games Workshop (LSE:GAW).
The niche hobby business is the mastermind behind the Warhammer franchises and it makes the bulk of its money from selling plastic miniatures.
On the surface, that doesn’t exactly sound like a high dividend-growth enterprise. Yet in practice, the firm commands extraordinary pricing power from a cult-like following of its core customers. And now that the group’s begun ramping up its expansion into digital media, its long-term growth potential remains substantial, in my eyes.
Combining this trajectory with an enviable and sticky 42% operating margin, shareholder payouts have increased 900% over the last decade. That’s an annual growth rate of 25.9%. And anyone who invested back in 2015 is now earning an unbelievable 103% dividend yield!
Risk versus reward
I’m undeniably bullish on this business. However, I’m also not blind to the risks it faces. 2025 was an exceptional year following the enormous success of Space Marine 2, which generated large royalty income for the company. Sadly, that income isn’t likely to repeat in 2026, opening the door to tough comparables and earnings compression.
While this is ultimately a short-term problem, any slowdown combined with a premium valuation is a recipe for volatility. And this risk is only amplified by the expected £12m profit hit from US tariffs.
Nevertheless, in the long run, these issues may only be a short-term speed bump. That’s why I’m not selling any of my shares. And should the stock decide to take a tumble, I’ll be ready and waiting to buy more.
