BB, There have been some good suggestions made.
You are already aware of some of the higher yielding shares that are available. And yes there is a risk, some are dropping (e. g. Vodafone) and others are steady, but there is also the 'risk' that they will rise and and give you an IHT 'headache'.
Others have spoken about bonds, but these have their own risks attached. Be sure you can get out easily without the company playing silly buggers when you try to sell, however, it is unlikely you will recover all the capital outlay.
I have this concern about buying into shares at the moment, the market seems to have gone doolally at the moment (too high for all the risks around) and there will be, in my view, a sharpish adjustment. That would be the time to buy in. In such an instance you should be able to buy more than enough to cover your requirement, and here I am talking shares.
Somebody mentioned Lloyds, the bank ain't 'payin nuttin', but there are, perhaps, prospects next year.
I recently bought into BG, even when it dropped quite substantially, only to see it drop further, but then this is a long term punt, and it only pays circa 1.57%.
I think I am more a share man, and with that sort of money and the state pension you should be able to get pretty close, if not exceed your target, and if there is a shortfall you can realise a proportion of the investments to make up the shortfall.
And yes, if you are a novice, the market is probably a scary place. I was initially guided by a broker, who put me into 'safe' stuff, Vadafone, RSA (as it was) RBS (Natwest, as it was) and a few others, and they lost money and are still 'losers' in terms of the original amount invested. Others, HSBC are better. However years on, and my own choices (including the 'dogs') I am about 25% up overall, and income providing a half decent retirement, would have been better but for Brown/Balls, may they rot in Hades, forever.
Invest, say, £600K, keep the £25K, part of it will go in fees of buying, and part be kept to tide you over until the divis roll in and a reserve for any short fall.
If in good companies, then the divis are more likely (no guarantee) to rise to meet rising fees.
The raid on the capital, if needed, should not be of long duration, and with the possibility of growth you may be better off. Being shares, the money is easily accessible, particularly for the tax man's kilo of flesh and gallon of blood when the need arises.
My farthing's worth.
