I’m looking to bolster my self-invested personal pension (SIPP) by adding quality UK stocks to it when I next have some cash to spare.
Can I buy UK stocks for my SIPP?
A SIPP is a personal pension that allows you to save, invest, and build up a pot of money for when you retire.
With a SIPP, you manage and choose your own investments or pay an authorized financial adviser to help you. SIPPs offer wider investment options compared to other types of pensions. These options include company shares, like the UK stocks I’ll mention later, open ended investment companies, investment trusts, and property or land, but not most residential property.
Below are my two picks.
Insurance and investments
Insurance and asset management business Phoenix Holdings (LSE: PHNX) owns Standard Life and SunLife to mention some of its better-known brands. In total, it serves around 12m customers.
As I write, Phoenix shares are trading for 455p, which is a 16% drop over a 12-month period. The shares were trading for 543p at this time last year.
The current macroeconomic volatility that has caused a cost-of-living crisis could pose Phoenix problems. Non-essential insurance spending could drop, with less cash in people’s wallets. Furthermore, consumers may have less money to spend on investments and retirement products too.
However, to me, Phoenix looks like one of a number of quality UK stocks with excellent fundamentals. I believe Phoenix is in an excellent position to perform well in the longer term. It has a great profile and presence and should benefit from an ageing population in the UK that wants to secure the next chapter of their lives.
Next, Phoenix shares would boost my passive income with a dividend yield of 11%, which looks well covered by 1.5 times earnings. Of course, dividends are never guaranteed. Finally, the shares look cheap to me on a price-to-earnings ratio of six.
House builder
Barratt Developments (LSE: BDEV) is the UK’s largest residential property developer and one of a number of UK stocks in the house building sector I like. House builders have excellent track records of rewarding shareholders.
Barratt shares are currently trading for 417p. They’re up 18% over a 12-month period from 352p at this time last year.
The housing market is a tricky one. Macroeconomic issues including rising interest rates, fears of a housing crash, and soaring costs have made the house building sector quite volatile lately. Mortgages are harder to obtain and costs to build homes are creeping up. These are all risks that could hamper Barratt and its performance.
Conversely, Barratt is in an excellent position to benefit longer term, in my opinion. Demand for housing is outstripping supply by some distance. This should help the business remain robust for many years. It already possesses a healthy forward order book. All of this can translate into increased earnings and payouts.
Finally, Barratt’s dividend yield stands at 7.8% at present and the shares look decent value for money to me on a price-to-earnings ratio of seven.
Due to recent market volatility, there are plenty of quality UK stocks out there trading at discounted levels that could help boost my SIPP. These are just two I like.
