If you’re saving for retirement, dividend shares in a Self-Invested Personal Pension, or SIPP, can make a real difference. SIPPs let you pick your own investments, and dividends give you regular cash payouts from solid companies.
Think of it like getting a pay cheque from your portfolio, even before you retire. Reinvest those dividends now, and they compound over time, turning small savings into a decent income pot later.
For novice investors, it’s a straightforward way to build wealth without daily trading stress.
Two ever-popular UK dividend shares
Two of the most popular dividend shares in UK SIPP accounts are Legal & General (LSE: LGEN) and Lloyds Banking Group (LSE: LLOY). Data from investment platforms shows them among the top holdings by value.
Investors likely opt for them because they’re FTSE 100 blue chips that are highly established, with decades of history paying shareholders.
Unlike speculative tech stocks, these are the reliable giants that have weathered recessions, pandemics, and rate hikes.
Let’s take a closer look.
Insurance income
Legal & General stands out with an eye-catching 8% dividend yield. That’s double the FTSE average, and it has kept payments going for 42 straight years. As a top insurer and asset manager, it handles pensions and savings for millions of Brits.
The firm’s latest 2025 annual report shows profit before tax of £824m, almost double from £448m the year before. Yet the price is only around 11 times forward earnings, suggesting it’s still fairly valued.
But with a high payout ratio, it’s difficult to assess whether the dividend is covered by earnings or cash flow. Some analysts have pointed out this could be due to accounting discrepancies but it’s worth keeping an eye on.
Other risks insurers face include uncertain regulatory risks and declining interest rates, which could thin margins.
Still, for long-term income, it’s an enduring SIPP staple worth considering.
Britain’s bank
As the UK’s biggest retail bank, Lloyds benefits from everyday customers — mortgages, current accounts, you name it. That consistent demand and familiarity add appeal for investors.
It has a much lower 3.5% yield but with a prudent 52% payout ratio, it has plenty of cover for tough times. The P/E ratio of 14.7 also looks fair for a bank growing loans and deposits.
Still, falling interest rates are a concern, and there’s the risk of loan defaults if the economy sours. Plus, the ongoing motor finance probe hangs over its head.
Yet, its scale and £3.9bn capital return in 2025 scream stability.
In its latest FY results it achieved £18.3bn net income (up 7%) and statutory profit after tax at £4.76bn (up 6%). That suggests stable, sustainable growth.
The bottom line
Building a retirement SIPP always takes dedication and patience, but a solid foundation makes a huge difference.
Popular stocks like Lloyds and L&G are worth considering as a base, before diversifying across sectors and regions.
A mix of growth and dividend shares help to smooth out volatility as markets cycle through different periods.
But if you’ve already laid your base and are looking for more exciting income picks, I’ve been eyeing up several attractive options lately…
