UK shares have long been the preferred option for investors interested in income from a self-invested personal pension (SIPP). The FTSE100 lists many of the industry’s leading blue chips generating plenty of cash to fund growing dividends.

It has already been said that payouts to shareholders could reach a record £88.8 billion this year. For retirement-focused investors, the tax benefits of a SIPP are a great way to make the most of those withdrawals.

Please note that tax treatment depends on each client’s individual situation and may change in the future. The content of this article is for informational purposes only. It is not intended to be and does not constitute any form of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

But with yields across the index compressed, is now the right time to get in on the action?

Why matters now

The rapid growth on Footise means yields have fallen below average this year (3.4% compared to the long-term average of 4%). This means that the decision to invest through a standard FTSE tracker fund may provide a less impressive income than in previous years.

Fortunately, there are many individual dividend stocks that are bucking this trend and offering higher than average yields due to mitigating market factors. This is where the opportunity lies for people looking for long-term income in retirement.

Looking at dividend.co.uk, the current top earners are:

Some of the names I see in the top 10 every month include insurers such as Legal & General and Standard Life. Real estate investment trusts (REITs) such as LondonMetric Property and Landsec also often generate high returns thanks to favorable REIT regulations.

Buy for me, the standout on this list is Barratt Redrow. Let’s see if its extremely high performance makes it a good fit for SIPP.

Underrated income game

Barratt Redrow is the UK’s largest construction company, with a vast land bank and a forceful balance sheet. Its profitability is high mainly due to the decline in the share price (down 32% in one year), which may signal problems in the British housing market.

Despite a recent 10% cut, it is still paying out a significant amount to shareholders. The company recently launched a £100m share buyback program and net cash is expected to be in the region of £550-650m at the end of 2026.

Although revenues fell slightly to £4.17 billion in 2024, they rose to £5.58 billion in 2025, so the economic recovery is already underway.

However, from a valuation standpoint, the price-to-book (P/B) ratio of 0.51 suggests pessimism about the market. Buying today may mean waiting several years for the situation to improve, which may be an acceptable sacrifice for a retiree with a 10-20 year horizon.

However, this is risky. The UK market is sensitive to interest rates, mortgage availability and consumer confidence. Dividends may be further reduced as we wait for a recovery.

So what’s the verdict?

Barratt shares are down 65% from their pre-2008 highs. If the market recovers, this growth plus dividends could provide huge profits for (very) patient investors.

While the low valuation and yield are attractive, they also suggest a clear market warning about the gains and risks of the housing cycle. So, for investors who are confident about market recovery, a petite allocation of 1-2% would be reasonable.

For those who are more risk averse, there is another income item on this list that looks good – albeit without the potential for a high-level economic recovery.

What income stocks do we like better than Barratt Redrow right now?

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Mark Hartley owns shares in Legal & General, Standard Life and Aviva.