This can seem complicated and difficult as an expat, and the answer depends on which of the following categories you fall into:
employed by a Spanish Company (on a contract)
self-employed running your own business in Spain (autónomo)
retired/not working in Spain but not at State Pension age (Convenio Especial)
retired in Spain at or over State Pension age (an S1)
I’ll cover each of these with a broad outline of how it benefits you …
If you have a Spanish employment contract in place your employer will automatically deduct the social security contributions required by you and your employer. This entitles you to access the Spanish healthcare system, build up a Spanish State Pension, receive sick pay and also maternity pay. Prescriptions are subsidised and you are entitled to the Spanish version of the European Health Insurance Card for travelling (EHIC).
Family members can also be included in health system coverage as long as they live at the same address and they may be asked to prove their familial connection.
Autónomo is the Spanish term used for the self-employed in Spain. If you wish to start your own business in Spain you need to register as self-employed (autónomo) for income tax and social security. The minimum social security contribution is €286 pm, irrespective of earnings and it increases with age. The amount you pay also depends on the category that your profession falls into. Generally, the more dangerous your job the more you will pay.
However, for newly registered autónomo the contribution starts at €60 pm, increasing to €137 pm after 12 months and €198 pm after 18 months, reaching the full amount by the end of the 2nd year. For men under 30 and women under 35 there is a further reduction for an extra 12 months of 30%, bringing their total discounted period to 36 months.
Registering as autónomo allows you to access the Spanish healthcare system, build up a Spanish State Pension, receive sick pay and also maternity pay. Prescriptions are subsidised and you are entitled to the Spanish version of the European Health Insurance Card for travelling (EHIC).
Family members can also be included in the autonomo’s coverage as long as they live at the same address and they may be asked to prove their familial connection.
RETIRED/NOT WORKING IN SPAIN BUT NOT AT STATE PENSION AGE?
This can be the cause of worry for many expats, especially if age or health issues make private health insurance expensive or not possible.
What is the alternative?
Convenio Especial – Although not ideal, this could be a solution and it is generally affordable for most people. Contributions for those under age 65 are €60 pm and for those over age 65 €157 pm. All pre-existing conditions are accepted and it can be used as proof of access to healthcare for residency applications.
To apply for Convenio Especial you must be on the Empadron (electoral list) for at least one year and have lived in Spain for one year and not be working.
Unfortunately, you must pay the full cost of prescriptions as they are not subsidised under this scheme, you are not entitled to an EHIC for travel and you do not build any entitlement to a Spanish State pension.
RETIRED IN SPAIN AT OR OVER UK STATE PENSION AGE (AN S1)
You and your dependants may be entitled to state healthcare paid for by the UK if you’re a Spanish resident and receive a UK State Pension. If you have a UK State Pension, you must request an application form by phone from the Overseas Healthcare Services. This is part of the NHS Business Services Authority (BSA).
NHS Overseas Healthcare Services
Telephone: +44 (0)191 218 1999
After registering your S1 at your local Social Security office in Spain you will receive a Spanish social security number by post. Take this to your local healthcare centre to register. You’ll then receive a Spanish Medical card which you can use when you visit a doctor, hospital or pharmacy. Prescriptions are subsidised and you are entitled to the Spanish version of the European Health Insurance Card for travelling (EHIC).
ENTITLEMENT TO A SPANISH STATE PENSION …
For the Spanish State pension, you must pay social security in Spain for 15 years before reaching retirement age (in 2021 State pension age is 65 if you have contributed for 37 years and 3 months or more, and age 66 if you have contributed for less) and two of those years must have been in the last 15 years before retirement. Note that anyone short of the fifteen years contributions can continue contributing after reaching age 65 to secure their right to the Spanish State Pension. 15 years contribution record entitles you to 50% of the full State Pension. This rises in percentage (approx. 3% each year) for each additional year worked, reaching a maximum of 100% for those who have contributed for 37 full years (rising to 38 years by 2027).
For 2020, the minimum full Spanish State pension payment for an individual with a dependent spouse was €843.40 (€11,807 pa) and with a non-dependent spouse €648.70 (€9,081 pa). Without a spouse €683.50 (€9,569 pa). There are 14 payments per year.
WHAT ELSE IS THERE TO CONSIDER?
When settling into life in Spain, accessing the healthcare system is one of many things you can do to ensure that you are set up in the best possible way, but I recommend you think about your savings and pensions too.
Not only are interest rates at less than 1% pa, but savings held in UK banks/building societies are not tax efficient when you live in Spain, including ISAs. Similarly, Investment Bonds held in the UK, Isle of Man or elsewhere are not tax efficient when you live in Spain unless they specifically state on the paperwork that they are a Spanish Compliant Investment (these are typically based in Dublin). You may also be leaving yourself and/or your partner open to Spanish Inheritance Tax which is totally avoidable if your savings and investments are set up correctly, allowing you to take advantage of special tax breaks available to you as a Spanish resident.
The equivalents available to you are tax efficient in Spain and offer much better potential for growth than money left on deposit.
Whether you have a personal pension, a SIPP, a drawdown plan from which you take income or any other type of pension, it is worth considering the alternatives available to you when you live in Spain. For instance, a Qualifying Recognised Overseas Pension Scheme (QROPS) offers tax efficient income paid gross, at a typical rate of 3% marginal income tax and no cliff edge at age 75 when tax becomes payable on your death with a UK scheme. A UK Scheme will always be taxed in the UK under PAYE irrespective of where you are tax resident, which could result in an overpayment of tax when you live abroad.
I recommend that you speak to us sooner rather than later as we can help you navigate the Spanish system and organise your finances in a way designed to minimise the tax due whilst maximising growth and protecting your assets for your loved ones.
If you would like assistance from us contact email@example.com
Speed Financial Solutions are a highly qualified financial services provider looking after clients throughout Spain and the UK. We provide a discreet and comprehensive service to individuals, and our service is tailored to suit your needs taking advantage of tactical opportunities as they arise in respect of your pension planning. We seek innovative solutions for our clients and employ our skills, based on many years of experience, to apply tax legislation to your advantage. Our relationships are built on trust and mutual respect. We are ready to answer your questions, giving you the confidence you want when dealing with a sensitive issue such as discussing your pensions, investments and savings.
Our Principal, Andrea Speed, is a qualified Discretionary Investment Manager specialising in Investment and Risk, Taxation and Trusts, and a qualified Pension Specialist. Andrea is also a Fellow of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.
Along with a Fellowship, Andrea is a CII Chartered Financial Planner.
Please take a look at our website – www.speedfinancialsolutions.com
For further information contact us on Tel 951 315 271 or 951 318 529
We are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation. Follow us on Facebook for regular updates.
The contents published are not recommendations or decision aids for your investment decisions and they do not constitute any type of advice. We are not tax advisers and independent tax advice should always be sought.
Andrea J Speed FPFS (DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
19 April 2021