A once-in-a-decade chance to earn a supersized passive income from UK shares?

Generating passive income from a portfolio of FTSE 100 shares is a great way to fund retirement. It’s especially attractive inside a Stocks and Shares ISA, where all growth and income are tax-free for life, and the pot can even be inherited by a spouse or civil partner.

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.

The deadline for contributing to this year’s £20,000 ISA allowance is now less than a month away on 5 April, so there’s no time to lose. Yet many will feel nervous, given the volatility hitting global stock markets due to war in Iran. Dare investors buy today?

The FTSE 100 fell 1.25% on Friday (6 March) and is down around 5.75% over the past week. However, it’s worth remembering that before this wobble, the index was trading close to an all-time high. It was poised to smash through the 11,000 barrier for the first time.

FTSE 100 buying opportunity

Despite the dip, long-term investors are still comfortably ahead. The index has risen 18.5% over the past year, with dividends lifting the total return to roughly 22%. Over five years, the total return is more than 80%.

It’s another reminder that investors shouldn’t panic when markets wobble. Short-term ups and downs are simply the price investors pay for the superior long-term returns that equities tend to deliver. Dips like these offer an unmissable opportunity.

The simplest way to deal with short-term volatility is to buy shares for the long term. At least five years, and ideally 10, 15, 20 and beyond. Saving for retirement is a long game, and historically equities typically beat most other asset classes over time, especially when dividends are reinvested.

Market dips can even create opportunities for second-income investors too. When share prices fall, dividend yields rise. That’s because yields are calculated by dividing the dividend per share by the share price. If the price drops while the dividend holds steady, the entry-level income automatically climbs.

Aviva for dividends and growth

Insurer and asset manager Aviva (LSE: AV) is a superb FTSE 100 dividend growth stock. It delivered another strong set of results on Thursday. Operating profit jumped 25% to £2.3bn, helped by strong general insurance premiums across its UK, Ireland and Canadian businesses.

The board also resumed share buybacks with a new £350m programme. That didn’t stop the shares getting caught up in wider turbulence, dropping 8.5% last week. As a result, the trailing dividend yield has climbed back to around 5.7%. Better still, analysts expect the yield to rise to 6.7% in 2026 and potentially 7.1% in 2027.

There are risks, of course. Aviva operates in a competitive market and rivals will be hungry to catch up. The shares still look a little expensive despite the dip, with a price-to-earnings ratio of about 24. If the Middle East crisis intensifies and markets fall further, Aviva won’t escape unscathed.

I still think it’s well worth considering. If the share price falls further, those yields will climb even higher, potentially creating an even bigger passive income opportunity.

The post A once-in-a-decade chance to earn a supersized passive income from UK shares? appeared first on The Motley Fool UK.

More reading

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• What next for Aviva shares after a cracking set of 2025 results?
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• I wish I’d bought Aviva shares 3 years ago – should I buy them now?
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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