When it comes to pension planning, both a SIPP and an ISA can have some pros and cons.

There’s no free money in an ISA

Both vehicles can help someone to accumulate capital gains and dividends in a tax-efficient manner.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

But an ISA does not involve any ‘free money’ – at least not from the government. An ISA provider may have a promotion that offers a cash incentive to use them.

Believe it or not, a SIPP does offer free money. Specifically, the government offers tax relief for income tax payers contributing to their SIPP.

So, it is essentially the Exchequer giving you with one hand what they already took away with the other.

Still, that can be a substantial bonus. For example, a basic rate taxpayer who puts £8,000 into their SIPP will have £10,000 to invest thanks to the tax relief. Higher and additional rate taxpayers will find the tax relief even more lucrative.

SIPPs have some important constraints

So, why do people use an ISA over a SIPP given the free money a SIPP can involve?

One big consideration is what happens to the money after it is in the vehicle.

With an ISA, someone can decide to take the money (or some of it) out at any time. There may be several reasons why someone chooses to take money out. For example, they have an unexpected expense like higher school fees due to tax changes, or a medical emergency.

By contrast, the SIPP is designed in a way that is meant to keep people focussed on their retirement finances even when other emergencies pop up along the way.

So they cannot take a penny out of the SIPP until they are 55. Even then, only a portion of it can be withdrawn tax-free. For withdrawals over that limit, capital gains tax rules would apply.

That different tax treatment could make a SIPP less attractive, when compared to the absence of tax on capital gains made inside an ISA then withdrawn. The lack of flexibility about withdrawals before 55 may not suit some investors either.

Here’s my approach

I see benefits in both vehicles, as well as less attractive features, so I have both a SIPP and a Stocks and Shares ISA.

As a long-term investor, I try to focus on shares I think have potential for the coming decades. One I think currently merits consideration is Pets at Home (LSE: PETS).

Its share price has fallen by a fifth over the past year and now stands at just 11 times earnings.

Personally, I think pet lovers will keep spending money on their animals even when consumer spending more broadly is squeezed.

There are risks: the share price fall reflects Pets at Home’s weak retail performance. It has been trying to improve that but there is a risk that the wrong stock selection or uncompetitive pricing could still cost it sales.

The company has a large and growing group of vet practices to help offset that weakness – and a dividend yield of 7%.

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Might it?

The deadline’s about contributing, not investing

At first glance, the answer seems to be no.

The annual deadline is about putting money into an ISA, not investing it.

Once the money is in the ISA wrapper, it could potentially sit there for years before someone puts it to work in the stock market. So, there is no necessary, direct connection between the deadline and buying shares.

Seen another way, though, there may be a link between the two things.

If someone wants to start buying shares, it makes sense for them to consider doing so as tax-effectively as they can. A Stocks and Shares ISA is a commonly used investing vehicle precisely because it allows many investors to do that.

So, putting some money in before this tax year’s allowance expires could be a savvy move for someone to consider now, even if they have not yet decided what they will end up investing it in.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Choosing the right ISA – and the right shares

With the focus on ISAs at this time of year, some providers offer promotions to try and attract customers.

So it can be a smart time to compare different options and choose one that seems right for your own individual needs.

As I said above, it is possible simply to open a Stocks and Shares ISA and put some money into it, with no rush to start buying shares. However, I do think that the current stock market turbulence means there are some high-quality shares that currently look attractively priced.

My own approach when hunting for shares to buy is to stick to business areas I feel I understand, focus on the quality of the business, consider its long-term prospects, and decide whether I think the share price is attractive. A great business can make a terrible investment if you pay too much for it.

A share I like for the long term

As an example, one share I own is Pets at Home (LSE: PETS). The FTSE 250 company has a chain of pet supply shops, as well as vet practices.

Pet lovers are usually willing to spend on their animals and the market is fairly resilient, as there is always a fairly sizeable population of furry friends.

With its extensive network of shops, popular membership programme, and strong brand, Pets at Home has been able to do well out of this market.

Indeed, it has a dividend yield of 7.2%, suggesting that buying £100 of its shares today could earn an investor around £7.20 of dividends annually.

Dividends are never guaranteed, though, and the company today signalled a new dividend policy that will likely lead to lower future payouts.

The chain has had challenges, including the wrong product assortment hurting its retail sales.

In a trading statement today (31 March), the firm said its retail turnaround plan is progressing. I see that as positive, but weakening retail sales remains a risk for the company.

However, with lots to like and a juicy dividend to boot, I see it as a share for investors to consider.

The post Does this weekend’s ISA deadline make now a good time to start buying shares? appeared first on The Motley Fool UK.

Of course, experienced investors know that a high yield can often be a warning sign. But there are always exceptions, allowing smarter investors to unlock a chunky passive income.

With that in mind, let’s take a closer look at a 7.5%-yielding stock on offer right now.

An emerging opportunity?

When it comes to pet care, Pets at Home (LSE:PETS) is the UK’s leading enterprise. The company’s built an entire ecosystem of retail and veterinary solutions, turning it into a one-stop shop solution for pet owners across the country.

Yet, despite having this dominant market position, its recent performance has been far from perfect. Throughout 2025, management issued multiple profit warnings due to a combination of headwinds. On the costs side of the business, increases to the Minimum Wage and employer National Insurance Contributions have both taken their toll.

Meanwhile, on the sales side of the equation, demand for premium pet food has waned as consumers have started moving away from legacy brands and into the arms of newer direct-to-consumer solutions. And combined, these factors have put significant pressure on profit margins.

That certainly helps explain why the Pets at Home share price has taken a near-25% tumble over the last 12 months. Yet even with these challenges, dividends have continued to flow. And looking out to the horizon, they might even be on track to grow.

Incoming catalysts

Management isn’t blind to the pressures facing its business. And action has already been taken to deliver £20m in annualised savings through various initiatives, with benefits expected to begin emerging later this year.

Furthermore, the record number of new puppies and kittens registered during the pandemic are now entering mid-life where vet visits are less frequent. But as they get older, that dynamic will change, creating a long-term, multi-year demand tailwind in the coming years.

In the meantime, the firm’s joint venture with Vet Group is chugging along nicely, expanding its capacity to meet this incoming demand surge, while still delivering impressive free cash flow. And when combined with the excess cash generated by the rest of Pets at Home’s businesses, dividends remain comfortably cash-covered even with a chunky 7.5% yield.

So is this a no-brainer for passive income investors?

What to watch

Assuming management’s able to get things back on track, this might indeed be a rare opportunity to lock in a 7%+ yield. However, it’s important to recognise that success isn’t guaranteed, especially considering regulators have taken aim at the UK veterinary sector.

With an investigation currently underway by the Competition and Markets Authority (CMA) about Pets at Home’s dominant position, the company could end up facing restrictions over pricing and further expansion. The findings of this investigation have yet to be published and so, for now, remain an overhanging source of uncertainty.

For now, the dividend appears to be here to stay. But if the CMA’s investigation comes to a negative conclusion, the stock could have much further to fall – a risk that investors will need to consider carefully. That’s why I’ve got my eye on other lower-risk passive income opportunities…

The post Does a 7.5% yield make this passive income stock a slam-dunk buy? appeared first on The Motley Fool UK.

Three popular names that have slipped this past month are Pets at Home (LSE: PETS), British Land and Aberdeen (LSE: ABDN), each sporting chunky yields between 6%-7%.

Pets at Home

Pets at Home makes most of its money from pet products, vet services and grooming, so its sales are tied to everyday (but emotionally-driven) pet spending rather than big-ticket items. The shares now yield roughly 6.7%, with dividends covered 3.6 times by cash and a payout ratio of 77%.

Recent results showed steady profits and continued dividend growth over the last decade, suggesting the board’s comfortable sharing cash while still investing in the business.

Valuation looks reasonable, with a price-to-earnings (P/E) ratio of 11.7 — lower than many UK consumer retailers. However, stubborn inflation poses a risk: while people rarely cut pet spending first, any deeper recession could slow discretionary purchases like toys or accessories.

Stiff competition from low-cost online retailers could pressure margins if shoppers look elsewhere.

British Land

British Land’s one of the UK’s big listed property companies, managing offices, retail parks and mixed‑use sites. Its shares currently offer a dividend yield of roughly 6%, with payouts accounting for only half of earnings. In its latest half‑year results for 2025/26, underlying profit rose 8% and earnings per share nudged higher, allowing management to lift the interim dividend by 1%.

Higher interest rates continue to challenge commercial property values, but as markets start to price in future cuts, yields on high‑quality property groups like British Land look more attractive.

The big risk is that if the UK economy weakens again, rental demand for offices and retail space could fall. That would pressure both income and property valuations.

Aberdeen

Aberdeen’s an asset manager that earns fees for running funds and portfolios for clients. The shares trade on a below-average P/E ratio and the dividend yield of 8% is very attractive. The company has kept the dividend going for 19 years and the latest numbers show a payout ratio around 80%. That’s a bit high but the dividend is still sufficiently covered by current earnings.

That limited cover’s a key risk though. If markets weaken and fee income drops, management could eventually decide to trim the payout to protect the balance sheet. On the flip side, a recovery in markets and fund flows would give it more breathing room, as rising asset values generally lead to higher fee revenue.

A rare income opportunity

For UK income investors, these three shares show why market dips can be useful moments to go shopping. Prices down 8%-10% can lift starting yields into the 6%-7% range.

Naturally, nothing’s risk free – from online competition to property cycles and market‑sensitive fee income. But the toss-up’s higher yields today to accept those risks, which can tilt the odds in your favour if you’re patient.

Any of these three may be worth considering but as always, I’d spread money rather than backing just one name, so that one bad egg doesn’t spoil an entire passive income portfolio.

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But what does that look like in practice?

One easy way to imagine it is to work through an example – here, I will use an approach based on someone contributing £300 per week.

Why a long-term approach can build serious income streams

In isolation, £300 might not sound like the basis for a strong income flow.

But remember, that is per week. So, week after week, month after month, and year after year, the amount invested can add up.

Meanwhile, what is already invested can help generate dividends. Those can be reinvested (compounded) in the beginning if desired, to increase the potential size of a second income down the line.

So, say someone puts aside £300 per week and compounds it at 6% annually. After a decade, the portfolio ought to be worth over £211,000.

At a 6% yield, that should generate around £12,676 of dividends per year. That would mean a four-figure monthly second income on average.

From idea to action

While that may sound good in theory, it will not happen by itself!

A useful first step is choosing a share-dealing account, Stocks and Shares ISA, or trading app to put the £300 into each week.

Setting up a regular contribution, such as a standing order or direct debit, could also help solidify this idea into action.

On the hunt for quality dividend shares

Another step is finding dividend shares that look set to maintain or even grow their dividends in future – something that is never guaranteed.

One share I think investors should consider at the moment is FTSE 250 firm Pets at Home (LSE: PETS).

For many of us, the first thing that name brings to mind may be the extensive network of retail shops selling everything from accessories to food for moggies, mutts, macaws, and more.

But the company also operates a large network of vet practices. The brand familiarity from one side of the business – boosted by an extensive loyalty scheme – can help drive custom for the other.

That two-pronged approach has been showing its usefulness lately. The retail operation has struggled to maintain sales, but good performance on the vet side of the business has helped counteract that.

Still, there is an ongoing risk that the wrong product assortment or pricing could make the firm’s shoppers look elsewhere. That helps explain why the share is 47% cheaper than five years ago.

That price fall also reflects a somewhat reduced interest in pets post-pandemic.

But this market is still massive and a falling share price has helped push the dividend yield upwards. It now stands at 6.2%.

I find that attractive from an income perspective. Indeed, Pets at Home is currently in my portfolio so I am hoping it will earn me welcome dividends in years to come!

The post What second income could you build up using a spare £300 per week? appeared first on The Motley Fool UK.

Definitely not! In fact, many people earn a second income by building up a portfolio of shares that pay them dividends.

Doing that does not require an initial lump sum of money. It is possible to start from scratch, by putting aside a certain amount of money each month to invest in shares.

How much will vary, depending on a person’s individual financial circumstances. In fact, that sort of flexibility is one of the things I like about buying dividend shares as a way to try and earn a second income.

Here’s what the income streams could look like

To illustrate this approach in practice, imagine somebody invests £500 per month for 20 years, compounding it annually at 6%.

At the end of that period, the portfolio ought to be large enough that a 6% dividend yield would equate to an annual second income of £13,607.

Building wealth with blue-chip shares

That initial 6% compound annual growth rate could come from capital gains, dividends, or both.

But it is important to remember that share prices can go down as well as up – and dividends are never guaranteed.

So, careful selection of the right shares to buy and hold is important. I like to focus mainly on blue-chip companies with proven business models I think have an enduring competitive advantage – and only when I can buy them at an attractive price.

Getting ready to invest

It is possible to earn the dividend income without waiting, by the way. Someone could simply take the dividends as they are paid, without reinvesting them.

That could mean they earn a second income sooner. But it would be correspondingly smaller than if they compounded the dividends over the course of two decades.

Either way, they will need a practical way to buy shares. So a good start to putting the second income plan into practice would be to set up a share-dealing account, Stocks and Shares ISA, or trading app.

On the hunt for quality shares

Just because someone puts in £500 per month does not mean that it needs to be invested immediately. They can build up cash until they find what they think are the right shares for them to buy – and at the right price.

One UK share I think is worth considering right now for its income potential is Pets at Home (LSE: PETS).

It offers a juicy 5.7% dividend yield.

The share price has fallen 42% in five years. Just because a share falls does not necessarily mean that it will recover that lost ground. But I see Pets at Home as offering an attractive valuation for a solid business.

The fall partly reflects challenges in the company’s retail arm. I think there is an ongoing risk that that could hurt performance, unless management can get the right assortment of goods and offer them at the optimal price.

However, the retail business remains large and I think it can be put back onto a growth track. Meanwhile, the company’s group of vet practices is growing handily and could keep doing so.

With a large customer base and loyalty scheme, well-known brand, and ongoing customer demand, I reckon Pets at Home could merit a higher valuation than its current one.

The post A £13,607 annual second income for £500 per month? Here’s how it can be done appeared first on The Motley Fool UK.

But how big would it need to be for that?

A lot of the answer depends on someone’s individual spending patterns. We need to start somewhere, though. A helpful place is the Retirement Living Standards published by the Pensions and Lifetime Savings Association.

It shows what the cost of retirement might look like for a “minimum”, “modest”, or “comfortable” retirement. A “comfortable” retirement for one person needs an estimated £43,900 per year.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Working backwards from a pensions goal

Now, after a certain point, someone can take capital out of their SIPP.

But, to keep things simple, let’s presume that they want a SIPP that generates £43,900 per year in dividend income.

Let’s imagine a 4% dividend yield. That may not sound ambitious but is actually well above the current FTSE 100 yield of 3.1%. When it comes to drawing income from a SIPP, people’s risk tolerance may be lower than in their younger days of still earning an income from working.

To hit that target, the SIPP would need to have just short of £1.1m in it.

Building up the pension value

While aiming to grow the SIPP without drawing income from it, the investor has some advantages.

First, there is tax relief.

For higher-rate taxpayers that can hit 40% and additional rate taxpayers can even get 45% (having paid an awful lot of tax in the first place).

But in this example we will use the basic rate tax relief of 20%. That means that, for every £1,000 you want to put into your SIPP, your cash contribution need only be £800.

A second advantage is a long-term time horizon. That can help compound value over time and let regular contributions add up.

Also, the potentially higher risk tolerance I mentioned above for a younger person not yet relying on their SIPP for living expenses means I think a 6% goal for compound annual growth while building the SIPP and not drawing income from it is reasonable.

That could come from dividends and any capital gains, but dividends are never guaranteed and shares can move down as well as up.

Here’s how much is needed!

The longer the contribution timeframe, the lower the contributions needed.

Let’s use 30 years for illustration. To hit the target above, monthly contributions of £1,093 would be needed.

Thanks to tax relief, that would be a monthly cash contribution of £875.

One share in my SIPP

One share I own in my SIPP is Pets at Home (LSE: PETS).

It yields a juicy 5.9% right now.

But the past five years have seen a share price fall of 47%. That means the current price-to-earnings ratio is 13. I think investors should consider this share.

The fall reflects some ongoing risks. The company has done a poor job of optimising its product range. If it does not get that right, sales could decline.

But its retail arm is well-established and has a popular loyalty scheme. On top of that, the company’s chain of vet practices is lucrative and growing at a good clip.

The pet care market is huge and I expect it to stay that way. With its strong market position, that is good for Pets at Home.

The post How much does it really cost to build a big enough SIPP for retirement? appeared first on The Motley Fool UK.

As with any passive income plan, there could be bumps along the road. No dividend is ever guaranteed to last. That is why such a plan envisages diversifying across different companies and always paying close attention to the quality of each investment.

But with the right approach I think a Stocks and Shares ISA can be turned into an income powerhouse!

A formula for income

How much depends on a couple of basic factors: the amount invested and at and the dividend yield. Yield is basically how much someone receives annually in dividends, expressed as a percentage of what they paid for their shares.

Yield is not fixed, as dividends are not guaranteed. But that is not always bad news: a dividend can be cut, but it can also grow. Some FTSE 100 firms have grown their dividend per share annually for decades.

At the moment, the FTSE 100 yields 2.9%. But I think a higher yield of 5% is possible, while sticking to proven blue-chip companies.

£500 a month adds up to £6k a year of income. At a 5% yield, that would require a Stocks and Shares ISA worth £120k.

But it is possible to start with far less – in fact zero. Putting in £20k a year and compounding it at 5% annually, the ISA would be worth over £120k after six years. At a 5% yield, the ISA should then be more than able to hit the income target of £500 a month, on average.

Choosing an ISA

For most investors, £20k is within the annual contribution allowance for a Stocks and Shares ISA.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Different ISAs have their own fee structures. Those can eat into returns, so it is important to take some time to compare options when choosing a Stocks and Shares ISA.

Could this dividend share be turning the corner?

One share I think investors should consider for its passive income potential is Pets at Home (LSE: PETS). It currently yields 6.3%. The share price performance has been awful, falling 49% in the past five years.

That has been partly down to challenges getting the right product selection on shelf at an attractive price. I see an ongoing risk management could get that wrong.

But a trading update this week helped boost investor sentiment. The most recent quarter still saw retail revenues falling, but there were early signs the company sacrificing some profit margin to make prices more competitive may be starting to improve sales volumes.

Meanwhile, not only was the news for the retail business encouraging, but the FTSE 250 company has a large chain of vet practices that has been growing strongly. That division saw revenues grow 5% year-on-year in the quarter.

The company benefits from a sizeable customer base and has an active loyalty programme I think can help keep them coming back for more.

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The answer depends on the dividend yield the ISA earns.

Yield is how much a share pays in dividends each year, expressed as a percentage of its current price.

At the FTSE 100 yield of 2.9%, a £1k monthly second income (£12k per year in dividends) would need an ISA worth around £413k.

A higher yield would reduce the amount needed, though it is important always to focus on quality and value when buying shares, not zooming in on yield in isolation. No dividend is assured.

But say the yield was 6%. In today’s market I think that is achievable while sticking to blue-chip dividend shares.

At a 6% yield, it would take £200k to hit the second income target of £12k per year.

Compounding can help

Still, most people do not have £200k sitting unused in an ISA. Fortunately, it is possible to start with nothing and build up over time.

By compounding (reinvesting dividends), things could be sped up.

Say someone puts £20k per year into their ISA and compounds it at 6% annually. After eight years, it will already be worth around £198k. After nine years, the ISA would be well beyond the £200k target.

At a 6% yield, that would be enough to earn over £1k per month in dividends.

Choosing the right ISA

Hitting those targets requires the right level of contributions and also achieving the 6% compound annual growth target first and 6% yield target later.

Something that can eat into that is fees and charges levied by the ISA provider.

So it is worth taking some time when selecting a Stocks and Shares ISA.

Building an income portfolio

I said above I thought a 6% target dividend yield is realistic.

The income ought to come from a diversified range of shares. Think of that as basically not putting all your eggs in one basket.

One share I believe investors should consider at the moment is Pets at Home (LSE: PETS). The FTSE 250 share has a dividend yield of 6.5%.

It has not been an easy couple of years for the company. Its share price has halved over the past five years.

Getting the right product at the right price into stores has proven tougher than hoped, hurting profitability. Management is working on optimising the range and pricing for the shops but there is an ongoing risk they will keep getting it wrong.

Still, the shop estate is substantial and I do think its performance can be turned around. Meanwhile, Pets at Home also has a large and lucrative chain of vet practices. This side of the business is growing handily.

Pet numbers rise and fall to some extent, but there is clearly a large long-term market here. Many owners are willing to spend a lot to take care of their furry friends. Pets at Home has a strong market position, large customer base and loyalty scheme, and a well-known brand.

I own the share in the hope of price recovery. Meanwhile the chunky dividends are helping me earn a second income!

The post How big an ISA does it take to generate a £1,000 monthly second income? appeared first on The Motley Fool UK.

But a week later, the index had almost slipped below 10,000 again, reflecting broader global pressures like China’s disappointing trade data weighing on commodity‑linked UK names.

For Britons focused on saving for retirement or a home, this mix of record highs and fresh uncertainty is a reminder to focus on quality — rather than chasing headlines. So for those thinking long-term, what’s the best way to plan for an uncertain 2026?

Global volatility

Late last week, China’s trade data landed like a lead balloon, and UK investors felt the tremors. Exports from one of the world’s largest manufacturers shrank faster than expected in December, dragging down commodity prices and slamming FTSE-exposed miners.

Yet on 9 January, major miners such as Glencore and Antofagasta were already back up 10.6% and 3.5% respectively.

This volatility, combined with the OECD’s 2.5% UK inflation call, may prompt some investors to rethink their investment strategy. While falling rates help bonds and utilities, consumer caution hurts retail.

So now may be the time to focus on defensive dividend stocks with wide moats — ideal for those with a 10-20 year outlook.

Getting defensive

A few popular defensive FTSE 100 stocks that investors may want to consider include National Grid, Unilever, BP, RELX and Pets at Home (LSE: PETS).

Let’s zoom on Pets at Home, because I’m a big fan of dogs and cats — but an even bigger fan of money.

When money gets tight, people cut down on a lot of things — eating out, holidays, drinking etc. What they don’t cut down on is feeding their animals. That makes this pet-focused company a defensive gem. Its vet services alone provide recurring revenue of over £150m annually from subscriptions.

The company holds a 24% UK pet care market share, bolstered by omnichannel growth and loyalty plans up 8% year on year. Dividend-wise, it offers a 6.6% yield with a 68% payout ratio covered by earnings and strong cash flows (34% cash payout).

Despite recent retail pressures, profits have been resilient. Now, analysts see it as undervalued, with the share price at 12 times earnings with growth potential. For retirement savers, it’s a consumer‑defensive play with strong income potential.

Still, it isn’t risk-free. Retail sales are down 3% and margins are under pressure from competition and higher costs. Plus, the recent exit of its CEO amid profit warnings led to sharp forecast cuts. If things don’t improve, a short-term dividend cut isn’t off the table.

The bottom line

Global economies are in flux, with China’s trade slump and OECD inflation warnings creating stock market surprises. Amid uncertainty, defensive UK stocks like Pets at Home offer stability through resilient earnings and reliable dividends.

Now seems like a good time to prop up a portfolio with stocks that enjoy consistent demand, even in downturns. Utilities, healthcare and consumer staples are typically good options, and having a mix from various sectors helps reduce concentration risks.

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