Becoming an Expat in Spain: Volume 18
Drawing on a UK Pension when you move to Spain
If you are dreaming of retiring in Spain and funding your retirement from your UK pension then you need to be aware of the following:
Rules change frequently in Spain, so what might be true at the time of writing this article, may not still be true by the time you read it.
You must seek advice from an advisor regulated in Spain, who ideally has a thorough knowledge of the UK pension system also.
A perfect choice would be an English advisor, previously working in the UK, now regulated in Spain (ensure you confirm their regulation number).
It is important to seek this advice well in advance of your intended move.
When you are a resident in Spain pension income will be taxed in Spain (the exception to this is government service pensions).
You cannot take a tax-free lump sum after you have moved to Spain so this will need to be done before you become resident in Spain to qualify for tax free status.
Spanish wealth tax applies to UK pensions, the value of your pension pot is added to your other assets to calculate this tax.
Wealth tax ranges from 0.2% to 3.5%, however you will receive a €700k allowance with a €300k allowance against the value of your domicile (some regional variations do apply).
Moving your pension into a qualified recognised overseas pension scheme (QROPS) can have advantages and disadvantages depending on when the fund is transferred in relation to whether you become resident in the first or second half of the year and also depending on which region you reside.
Because there could be massive negative financial implications in making a wrong turn in this process it is ESSENTIAL to seek professional advice from a correctly regulated advisor.