Moving To Spain? Here’s How You Can Transfer Your UK Pension

Spain is by far the most popular overseas destination for UK retirees. If you want to retire somewhere that boasts sun, sea, sand, and excellent culture, then Spain is a great place to choose.

But there’s more to think about than which beach to spend your days on! The two primary concerns for British retirees moving to Spain are securing a visa and accessing your pension payments in Spain. Both of these things are needed so that you can live safely and comfortably in Spain.

But how do you transfer your UK pension to Spain? How can you access your money when you’re living in a different country? Here’s what you need to know:

Accessing Your Pension in Spain

There are three main ways that you can access your pension in Spain. There is no right or wrong way to approach this, just the way that is most convenient for you. These options are to transfer your pension automatically using an international SIPP or QROPS. Alternatively, you could choose to keep your pension in the UK and then transfer your payments manually each month.

Transferring a SIPP

A SIPP is a self-invested personal pension, and this is a common type of pension plan in the UK. You can open an international SIPP, which has been created for UK pension holders who no longer live in the UK. This will allow you to transfer and then draw your pension while you’re living overseas.

It’s worth noting that a SIPP is self-invested (as stated in the name!), which means you would be responsible for managing your portfolio and making all the investment decisions yourself. Not only could this be time-consuming, but it also requires a certain amount of knowledge about investing. If you don’t have any investment knowledge, then this might not be the right choice for you. This should be considered the main drawback of this scheme.

Because of the self-managed nature of the SIPP fund, this is considered to be a higher-risk investment approach. You may lose some of the valuable benefits that you have attached to your existing pension fund. And if you choose to transfer your pension, this may make it subject to inheritance tax, so if you have a high-value fund, then this is worth considering too.

If you think this is the right approach for you, you’re advised to get some financial advice before making the switch. You should then contact your chosen company to set up an international SIPP.

QROPS

This is an acronym for another scheme: the Qualifying Recognised Overseas Pension Scheme. If you take this approach, then you will transfer your UK pension out of the country and into a foreign pension scheme.

To be eligible for this, the overseas scheme you choose needs to have similar rules and regulations to a UK-registered pension plan. To avoid HMRC charges, the overseas scheme should be located in the European Economic Area. And if you try to transfer your pension into a scheme that isn’t a QROPS scheme, then the UK government could either refuse the transfer OR charge you a 40% tax on the transaction. So choose your scheme carefully.

It’s worth looking into the financial ramifications before you opt for this approach. Some pensions have to pay an overseas transfer charge if you transfer your pension overseas, but you may be exempt. It’s important to check with your scheme provider to find out.

According to the UK government, “If you exceed your overseas transfer allowance, and the transfer is otherwise exempt from the overseas transfer charge, you’ll have to pay a 25 percent overseas transfer charge on the excess above the allowance.”

This is a great choice if you know you’re moving to Spain permanently. Perhaps you’ve already been living in the country for a while and know you want to make a home here. But if you’re not 100% sure, maybe look for other options. That’s because if you ever want to move back to the UK, you could again be subject to a large tax payment. This would take another huge chunk from your pension.

To transfer a UK pension to a QROPS scheme, download and complete Form APSS 263.

Self-Managing Your UK Pension

The final option available to you? Leave your UK pension where it is...in the UK! You keep your pension account as it is, and then when you receive your monthly payment, you transfer it into euros and into your Spanish bank account so that it’s ready to spend.

This is by far the easiest approach, but it may cost you more in the long run. You will pay a currency conversion fee for this transaction every month. And the amount you receive will fluctuate regularly too, due to the changing value of the pound against the euro.

If you still want to go ahead with this approach, look for a specialist currency provider, who can help you get those transfer fees as low as possible.

Before you decide to make any changes to your pension scheme, we advise that you seek the advice of a knowledgeable professional, such as a financial advisor with experience in both UK and Spanish pension schemes.

Are you thinking of moving to Spain? Dream of retiring away from the cold and rainy weather in the UK and making an escape to the sun? Then why not get in touch with our local property experts, who are perfectly placed to help you buy the Spanish home of your dreams. We’re excited to help you make your next move your best move!