UK Pensions for Expats in Spain

Spain is a popular choice for British expats looking to live, work and retire abroad. This blog explores how UK assets, including UK workplace pensions, are treated in Spain. A full overview is provided, exploring pension options, tax liabilities and much more.

Whether you’re considering relocating or you’re already a resident, this blog will cover the important information surrounding UK pensions and tax liabilities for retirees in Spain.

Understanding your multiple retirement income sources

Your pensionable income is likely to come from various sources. You may be entitled to the UK government state pension (funded by national insurance), a government service pension, a workplace pension, and a personal pension. You may also receive income from investments for example, rental income from UK property.

It is important to note that each type of income may be classed differently for taxation purposes in Spain. Because of this, it is important to seek financial advice to clarify how your worldwide pension benefits will be taxed.

Can I get my UK state pension in Spain?

If you’ve worked in the UK and paid national insurance contributions, you will have probably accumulated a state pension. The income you can expect from your UK state pension is dependent on the number of years you made contributions in the UK. The full State Pension is £185.15 per week; if you have completed 35 years of contributions, you are entitled to the full amount.

If you’ve contributed for less than 35 years, the amount you can expect reduces in line with your number of years of contributions. In order to receive a state pension at least 10 years of contributions must be made. The current age at which you can receive your UK state pension is 66.

The basic state pension is usually paid every four weeks into an account of your choice. The income can be paid to a UK bank or building society account or to an overseas account in the local currency.

Can I get my UK pension in Spain after Brexit?

Yes. Anyone who is eligible to benefit from a UK state pension, regardless of their nationality, can claim that pension while living in Spain.

How are UK pensions taxed in Spain?

The UK and Spain hold a double tax treaty, which stipulates that Spanish resident in receipt of UK workplace pensions are only taxed in Spain. It is important that you notify the UK tax authority that you are registered for tax purposes and paying tax in Spain. To do this, you need to complete the Certificado de residencia fiscal en España (tax residency certificate in Spain) and send it to the relevant department at HMRC.

The amount of tax you will pay in Spain depends on which income bracket you fall into. The table below outlines the income tax rates in Spain.

Taxable base (up to EUR)Tax liability (EUR)Excess of taxable base (up to EUR)Tax rate (%)
Source: PWC

Different types of UK occupational pensions

If you’ve contributed to an occupational pension in the UK, your pension benefits will be held with a UK-based pension scheme. 

There are two types of UK workplace pension, defined contribution, and defined benefit. Defined contribution pension schemes combine your contributions and your employer’s contributions into an invested pension account. The amount you will receive is based on the pot size and the investment growth.

Defined contribution pensions are not lifetime pensions, meaning the pot value can reach zero once all funds are withdrawn in retirement. Defined benefit pensions provide holders with a lifetime pension amount which is based on the member’s final salary and their years of service.

A full definition of both can be found here.

Transferring your UK pension(s) into a QROPS or SIPP

Many expats with UK pension assets choose to move their benefits into a Qualified Recognised Overseas Pension Scheme (QROPS) or Self Invested Personal Pension (SIPP). These accounts allow expats to consolidate pension assets into a single pension pot, convert their sterling pension into a Euro account and enjoy the administrative simplicity of managing one pension pot as opposed to multiple.

Members of defined benefit pensions have the right to request a cash equivalent transfer value (CETV), a one-off lump sum in exchange for their lifetime benefit. This sum can be invested into a SIPP or QROPS.

Should you wish to learn more about the options available to members of UK occupational pensions, please click here to arrange a pension review and suitability report for Spanish residents.

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