If retiring to Spain, the most important thing to do is to make sure that your pension arrangements are in order. Qualifying Recognised Overseas Pension Schemes (QROPS) have become a popular choice for British expats living or retiring in Spain. The use of QROPS in Spain as a retirement vehicle offers expats flexibility in terms of investment and currency choice. It also acts as an efficient and effective tax planning vehicle in terms of succession planning / inheritance.
When retiring abroad there are a series of issues that need to be addressed. This section focuses on a number of different areas of interest to expatriates.
Topics for discussion include:
- QROPS Spain: Pros & Cons
- Cost of Living in Spain compared to the UK
- Retiring to Spain: Best places
- Retiring to Tenerife
- Pension schemes in the UK and Spain compared
- Pension transfer to Spain
- Financial advice in Spain
- Taxation in Spain
QROPS Spain: make the most of your UK pension by transferring to a QROPS
As UK and European pension legislation evolves, so too do the opportunities in terms of how and where individuals can access their retirement benefits. By transferring a UK pension to a Recognised Overseas Pension Scheme there are a wider number of options available to you. Pensions that can be transferred into a QROPS in Spain include personal and occupational pension schemes.
1. QROPS Spain: Pros & Cons
The decision to transfer your pension from the UK should not be taken lightly. There are a number of advantages and disadvantages to be taken into account. A careful consideration of the benefits of using QROPS in Spain is designed to help you make up your mind.
A summary of these benefits include:
- You can take up to 30% of your pension fund as a lump sum from the age of 55
- Income can be drawn from your pension in the currency of your choice
- You have a wider range of investment options to select from
- Assets held in a QROPS fall outside of your estate for UK Inheritance Tax purposes
2. Cost of Living in Spain compared to the UK
When retiring abroad it is always an added bonus if the country you choose to go to has a lower cost of living than the one you are about to leave. Such is the case with Spain where on average things are about 30 – 40% cheaper to buy than in the UK.
3. Retiring to Spain: Best places
One of the great attractions of Spain as a retirement destination is that you are spoiled for choice. Whether you are seeking the Mediterranean climate, natural open spaces or city life, Spain has it all. Is it any wonder that it is the no. 1 place for British retirees!
4. Retiring to Tenerife
We often dream of retiring to somewhere that is sunny all year around. The Caribbean has it’s attraction for many British. However, the long flights and distance from family back in the UK can act as a disincentive. Closer to home, Tenerife has much to offer. When preparing your checklist for things to research before the move, make sure to give consideration to the transfer of your UK pension overseas.
5. Pension schemes in the UK and Spain compared
Before making a UK pension transfer to Spain it is best to compare the two pension systems. A QROPS based in Malta is recognised as a European pension by the Spanish authorities. As such income drawn from the QROPS will be taxed the same as any other Spanish pension.
6. Pension transfer to Spain
In order to transfer your pension to Spain from the UK, there are a number of rules that need to be adhered to. In the first instance you must have already left the country for tax purposes, or be intending to leave in the near future. Once tax resident in Spain, you can transfer your pension fund out of the UK into a QROPS in the same way that you would transfer between pension providers within the UK. Those eligible for such a transfer include:
- A UK national moving to Spain
- Any national who has built up UK pension benefits and is now resident or intending to become resident in Spain
As with all financial planning, individuals should take professional advice before attempting to move there pensions from the UK.
7. Financial advice in Spain
When living in Spain, it is important to understand how the system works in terms of structuring your finances. With the help of the internet the world has become a much smaller place. Whether you are seeking advice on issues relating to investments, tax, or retirement in Spain, there are answers out there for you.
8. Taxation in Spain
As we are only to well aware, tax is an inevitability in life. One of the roles of a financial adviser in Spain is to examine the current tax system and find out how allowances and exemptions can be used to the advantage of clients. Each region in Spain has the power to set it’s own tax rates in addition to the national rates. This should be factored into your decision-making in terms of where to locate.