UK private pension options when living in Spain

So, you’re moving to Spain (or have already made the move).  You may have decided to retire to Spain and are wondering what to do with your UK pensions … your UK financial adviser could also have said that they can no longer advise you due to your move.  That’s because in order to advise someone living in Europe, a financial adviser must be regulated within Europe … this has become an issue for many people post Brexit.

As you settle into life in Spain, it’s important to understand your options in respect of your pension plans.  You may decide to stay with your existing pension provider or transfer to another structure within the UK (alternatives can include a SIPP, Stakeholder or personal pension for instance).  Let’s take a look at both UK structures and QROPS:

QROPS

Whether they are personal pensions, SIPPs, Stakeholder pensions or company pensions, do you understand how your pensions fit into the jigsaw of living abroad, especially in respect of effective tax planning and flexibility?

On 5th April 2006 new pension reforms for UK personal and work pensions came into effect, allowing anyone with a UK registered pension scheme who lives abroad to

transfer their UK pensions out of the UK for the first time.  These are QROPS (Qualifying Recognised Overseas Pension Schemes).

QROPS offer several advantages, including, but not limited to:

-          income (dependant on the jurisdiction) is paid gross.  This makes life much simpler because you do not need to deal with different tax authorities.

-          QROPS are ‘typically’ taxed as a five year temporary annuity in Spain, resulting in a marginal rate of 3% income tax.  This may offer tax planning benefits for individuals resident in Spain, depending on personal circumstances and local tax treatment.

-          Whilst being subject to final legislation, proposed changes from 6 April 2027 would bring certain UK pensions within the scope of inheritance tax at 40%, for those who have used up their £325,000 nil rate band.  This is a big change, as pensions are currently outside of the scope of inheritance tax.  However, non UK residents will not be caught up in this change if they hold a QROPS and have been outside of the UK for five complete tax years, so the benefits can continue to be paid tax free on death.

-          IMPORTANT – if you have a QROPS and are considering a move back to the UK, or considering transferring your QROPS back to a UK registered pension scheme, be very careful.  A move to a UK registered pension scheme may not be in your best interests until you have completed 10 tax years as UK residents.  This is because the new pension rules only apply to those who are long term resident in the UK (which you are not deemed to be until you have completed 10 complete UK tax years as residents).  However, the new rules apply to any UK sited asset from 2027 (a UK SIPP or any other UK registered pension scheme will fall into this category). 

Previously, transfers to QROPS in the European Economic Area (EEA) or Gibraltar were excluded from a 25% Overseas Transfer Charge (OTC), provided that you also reside in the EEA or Gibraltar (for a minimum of five tax years following the transfer). These exemptions ceased to be valid on 30 October 2024, which means that the only way to avoid the OTC is to transfer your pension to a QROPS based in the country where you are a resident. Since there are no QROPS schemes currently available in Spain, transferring your pension without significant penalties is not possible. The Overseas Transfer charge can substantially impact your pension benefits, which is why careful consideration of your options is necessary.

A More Suitable Alternative—UK and International SIPP

Two of the most suitable QROPS alternatives for UK expats are:

A UK SIPP: A personal pension account designed for UK residents, making it suitable for expats who plan to repatriate in the future.

An international SIPP: A pension scheme tailored specifically to the needs of UK expats residing abroad.

Both domestic and international Self-Invested Personal Pension (SIPPs) are structured to provide you with more flexibility and control over your retirement fund investments. They are regulated by the Financial Conduct Authority (FCA) and approved by HMRC, ensuring regulatory oversight and security. Transferring your UK pension to a SIPP offers several advantages, including:

-          Flexible access to funds from age 55 (57 as of 2028)

-          Tax-free investment growth

-          Access to a wide variety of assets

-          Pension benefits transfer to beneficiaries without deduction of income tax if you pass away before age 75

-          Lower fees compared to transferring a UK pension to a QROPS

-          Simplified pension management through pension consolidation into a single plan if you hold multiple pensions

-          The servicing of your pension plan in Spain by a regulated and appropriately licensed adviser

International SIPP for UK Expats

There are a number of benefits of an International SIPP when you live outside of the UK, including:

-          Currency diversification - You can choose to hold assets and receive income in euros, reducing exposure to currency fluctuations.

-          Access to global investments - You can take advantage of international investment options, including overseas stocks, shares, mutual funds, and exchange-traded funds (ETFs).

-          Investment Freedom - With standard personal pension schemes, your investments are managed within the pooled fund that has been chosen.   A SIPP gives you the freedom to choose and manage your own investments from a wide range of different asset types.

-          Appointing a Discretionary Investment Manager of  your choice - You can choose to pay an authorised Investment Manager to make the investment decisions on your behalf.  The Investment Adviser will guide you to make investments that match your investment risk profile and that are both permissible under the Rules of the SIPP and acceptable to the Financial Conduct Authority (FCA). 

-          Portability - You can transfer to another registered UK pension scheme or to a QROPS if appropriate at any time.

-          Benefits paid gross to Spanish tax residents - Benefits can be paid gross to a Spanish tax resident if an NT tax code has been obtained from HMRC (due to the double tax treaty in place).  This simplifies tax returns, as you only have to declare on your Spanish tax return the gross income rather than trying to reclaim tax automatically deducted from HMRC under PAYE.

Summary

It’s important to get advice specific to your particular situation, how you hold your assets can have a big impact on the tax you and your loved ones pay in Spain AND the UK. Our aim is to ensure that you are able to enjoy life while we take care of your finances, ensuring you’re set up in the most tax efficient way for your particular circumstances.  If you are thinking about how best to navigate life in Spain, please do contact us, or book a free 30 minute consultation via our website.

Speed Financial Solutions are a highly qualified and regulated financial services provider looking after clients throughout Spain and the UK.  Established in 2010, 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 financial planning.

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 (Level 7) 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

admin@speedfinancialsolutions.com

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.

Any information provided within the above is the opinion solely of this company and investors should seek independent professional advice to clarify any matters relied upon.  Please note that regardless of qualification level, Speed Financial Solutions are not regulated/licensed tax experts and due to the complexities of the tax system and your aims and objectives it is highly advisable that you seek an independent tax opinion.

This communication is for information purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice form a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

Andrea J Speed FPFS (DM), M.A.

Principal, Fellow and Chartered Financial Planner

Speed Financial Solutions

31 October 2025