The Stocks and Shares ISA annual allowance is pretty generous in my view. With a £20,000 lump sum, investors can really get their investing journey off to a bang, and lay the foundations for a huge passive income later on.

Here’s how you could aim for almost £4k a month in extra retirement income, starting today.

Compound boost

Unfortunately, a lot of Brits don’t take advantage of the enormous tax benefits of the ISA. Over time these can be considerable, so the first step would be to consider opening one of these great products.

Unlike a general investment account (GIA), investors don’t pay a penny in capital gains tax when they sell shares. They also don’t owe money to HMRC on any dividends they receive. With these savings, ISA users have more money to invest, which enhances the snowball effect of compound returns.

What a lot of people don’t know is that Stocks and Shares ISAs are extremely versatile. They can be used to buy shares, exchange-traded funds (ETFs), and investment trusts from across the globe. This provides investors with substantial wealth-building opportunities and the chance to effectively spread investment risk.

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.

Buying quality shares

So, what sort of investment could you begin with? ETFs that track stock indexes and sectors are a quick and easy way for new investors to get started. Buying these this alongside choosing individual stocks can lead to greater long-term gains.

I think I’ve spied a great share to consider following recent stock market volatility. Coca-Cola HBC (LSE:CCH) is a FTSE 100 stock that’s slumped 12% over the last month, pushing it firmly (in my opinion) into bargain basement territory.

Like other global stocks, the soft drinks giant has fallen sharply because of the war in the Middle East. In this case, the market worries about rising cost pressures as oil supply disruptions drive inflation. They also fear the economic and inflationary impacts of the war on consumer spending.

I think these concerns have been overblown. The unmatched brand power of the company’s drinks supports strong revenues regardless of economic conditions. In fact, the likes of Coke are so beloved that the business can pass on increased costs to the consumer while still growing volumes, even in tough times.

Let me explain why I think Coca-Cola HBC’s now a bargain. At £42.33 a share, its price-to-earnings (P/E) ratio is currently 16.3 times. That’s well below the 10-year average of 20-21.

Earning a £3,854 monthly ISA income

With a diversified portfolio of quality stocks like this, I think an average annual ISA return of 9% is possible. That’s matches the stock market’s historical performance over time, and it would turn a £20k investment today into £294,612 over 30 years.

That’s not bad, but investing an extra £200 a month would add some real magic. This would lead to a Stocks and Shares ISA of £660,760 after 30 years, which would then deliver a £3,854 monthly passive income if invested in 7%-yielding dividend shares.