Defined Denefits pensions Spain

Is it a good idea to transfer?

With pension transfer values at record highs from UK final salary schemes, we have seen a huge increase in the amount of enquiries from expatriates living in Spain who are interested in transferring out of what were once branded ´gold plated´ pensions.

However, care has to be taken in this area as a transfer can not always be recommended. In fact the process can now only be carried out overseas by a limited amount of firms due to the restrictions the UK Financial Conduct Authority has put in place. Thankfully we have a robust process for giving advice in this area with all the correct infrastructure to carry out a transfer, if recommended.

But it´s not only the high transfer values that are dictating sentiment. After all, a guarantee of benefits is only of value if that promise can be upheld - and around 75% of the 600 final salary (or defined benefit) schemes in the UK are in deficit. The Pension Protection Fund (PPF) set up by the UK government is supposed to guarantee the members of any scheme in difficulty up to 90%, capped at €30,000 per annum. The issue here though is that the PPF is not funded by the UK government but by the schemes themselves. Furthermore the PPF has a mandate to lower that guarantee should it become unsustainable and there are many schemes who are relying on the PPF now.

Having said that, the main driver is high transfer values. These values are directly affected by the interest paid on government issued bonds (the yield on gilt-edged securities). The lower these yields, the higher the transfer values tend to be - and in our modern world of low interest rates, bond yields have really suffered. At Consultor Financiero Alfonso Santos we have a tried and trusted regulated transfer process in place, fully compliant with FCA rules. Importantly, we do not always recommend a transfer away from a DB scheme - it is very dependent on each client's individual circumstances and the particular scheme they are a member of. As always please be aware of pension 'scammers' and make sure you only deal with a regulated, qualified adviser.

•   Personal Financial Planning
•   Wealth Management, Investing and Pensions
•   Tax planning as a resident of Spain