If you’re a retiree and are thinking of moving to Spain, besides visas, your main concern will be how to get your pension payments in Spain so you can afford to live here comfortably.
If you’re from the UK and receive your pension from the UK either privately or from the state – what are the best ways to transfer your pension to Spain?
Pension experts list three main ways you can receive your pension in Spain. The first is an international SIPP, the second is a QROPS and the third is to keep your pension in the UK and transfer your payments individually.
READ ALSO: What Brits should know about SIPP and QROPS pensions if moving to Spain
SIPPs
SIPP stands for Self-Invested Personal Pension and is a UK-based pension plan.
If you open an international SIPP, you will be allowed you to draw your pension while you’re living abroad, in places including Spain. They are specifically created for non-UK residents who wish to transfer/consolidate their UK pensions.
As the point of it is that it’s self-invested, you will be responsible for managing your portfolio and making all the investment decisions yourself. Investment options include stocks, bonds, mutual funds, and even commercial property.
It’s best for those who already have some knowledge of investing or those who have the time and who are willing to put the work in to learn how it all works.
It is generally considered much higher risk to transfer funds from a regular pension into a SIPP as you may lose valuable benefits you have attached to it. Transferring your pension may make it subject to inheritance tax.
To move it over, you will first need to get some financial advice from an expert and contact your chosen company about opening an international SIPP. They will then lead you through the steps of how to change it over.
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READ ALSO: What taxes do foreign pensioners in Spain pay?
QROPS
QROPS stands for Qualifying Recognised Overseas Pension Scheme. Joining one means you can transfer your UK pension out of the country, but they also need to have similar rules and regulations to a UK-registered pension plan.
They must be located inside the European Economic Area (EEA) if you want to avoid charges from HMRC.
According to the UK government, if you transfer your pension to a place that is not a QROPS scheme, your UK pension provider may refuse to make the transfer, or you’ll have to pay at least 40 percent tax on the transfer.
You may also have to pay an overseas transfer charge if you transfer your pension overseas or you may be exempt. It’s important to check with your scheme provider to find out.
The UK government states that “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 type of pension is best for those moving permanently to Spain, because if you ever want to move back to the UK you could again be subject to a large tax payment.
In order to transfer your pension to a QROPS you will need to complete Form APSS 263, which explains what information you’ll need.
All you have to do is download and fill it out and give it to your UK pension scheme administrator.
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Converting your pension to Euros
The final option is simply to not transfer your pension to Spain at all and keep it in the UK. When you receive your monthly payments, you simply transfer them over to Euros and transfer them to Spanish bank account to use here.
While this is one of the simplest ways, it’s not always the most cost effective. Most Spanish banks will charge a high currency conversion fee. And with the value of the pound and the Euro constantly fluctuating, it will mean that some months you’ll get significantly more or less than others.
If this is your preferred option, the best way to mitigate charges is to work with a specialist currency provider. There are lots of different options out there, as well as online banks that will allow you to hold multiple currencies and convert them for a small fee.
It’s best to stop around and see what companies and currency brokers can offer.
Remember, before you decide on any of these schemes, it’s best to contact a professional about your particular situation and see what will work for you.
