Transfer a UK pension to Spain?

If you are resident in Spain (or thinking of making the move) it is important to consider the options available to you in terms of your UK pension. One of the avenues available to expats is to transfer out of the UK to a qualifying recognised overseas pension scheme (QROPS - formerly known as QROPS) Understanding the potential benefits of a QROPS is an important element in any retirement planning. These international pensions, although not in the UK, have to follow rules set out by the UK tax authority but they can offer more flexibility for people living in Spain. The alternative to a QROPS is an international SIPP (iSIPP), a pension in the UK BUT for non UK residents (expats). Here we itemise some of the main points to consider with both:

Why transfer from a UK pension?

• A QROPS international transfer enables you to take your pension outside the UK tax regime so no UK tax at source (although you may still have to pay tax on your pension income in Spain). Obtaining an NT tax code from HMRC will have the same effect on an iSIPP.
• A QROPS avoids the 45% UK tax rate imposed on pension lump sums left to non UK resident beneficiaries upon your death (if you die over the age of 75). QROPS pass on 100% of the remaining pot to your loved ones (or whoever you name as beneficiaries).
• You can benefit from full flexibility in an EU based QROPS as well as an iSIPP so you can take what you want when you want, once the time comes for taking pension payments.
• You can consolidate all your pensions into one, easy to understand, iSIPP or QROPS.
• There are no lifetime allowance restrictions with QROPS. In the UK the allowance is being reduced step by step and is currently just over €1,000,000.
• You can choose to have either international pension in Euros therefore removing your exposure to currency fluctuations.
• Is is no secret that many members of UK final salary pensions have decided to leave their schemes and take the (often) generous cash transfer values on offer. In such cases a QROPS or iSIPP, for those residing overseas, could provide the perfect transfer solution.
• If your pension is the only asset left connecting you with the UK, transferring it to a QROPS may help to prove you are no longer UK domiciled. Why is this an issue? If you were born in the UK you are likely still UK domiciled. Even if you have lived overseas for years. If you die whilst UK domiciled, UK inheritance tax is payable on your estate.
• There is greater investment choice with both a QROPS and iSIPP, allowing us to tailor a portfolio bespoke to you and your individual needs.
• A QROPS can protect your pension from future legislation changes by the UK government.
• If you are in divorce proceedings or company liquidation your UK pension could be at risk. A QROPS, being based outside the UK is better protected.
• Brexit! Many UK nationals living abroad in the EU have fears about the Brexit effect on their pensions. Once the UK has left the EU the UK government may put a stop to QROPS transfers (as it was the EU who effectively forced them into allowing them in the first place back in 2006.