Many people retiring to Spain from the UK worry about whether they are going to be able to get at their pensions in Spain, what the tax implications are and whether they will be better off or worse off. Many British people retire to Spain every year to enjoy a great retirement, have a wonderful quality of life and to have a standard of living that they just would not be able to enjoy on a pension in their home country. Retiring to Spain may enable you to pay for your cost of living and to enjoy luxuries such as eating out and holidays.

Let's consider some common pensions questions:

Will I still get my pensions in Spain?

Yes, if you are eligible for a UK pension, the Department for Work and Pensions will be able to pay your pension into either a UK account or a Spanish bank account. Some people like to get their pension paid into a UK account and then use a foreign currency transfer company to send them regular payments. If you choose to get your pension paid into a Spanish account, make sure you check whether you will be charged a receiving fee.

How do I arrange payments?

Inform the DWP of your move and give them all of the relevant information.

How and where will I be taxed?

If you have moved permanently to Spain, you will be liable to pay tax in Spain. Spain has a double taxation treaty with the UK so that you will only have to pay tax in Spain. You will need to inform the DWP and any private pension administrators of your move and get a code from the Inland Revenue so that you are not taxed on your pension in the UK. Get tax advice in Spain from a tax adviser who can help you to fill in your annual tax return to pay tax to the Hacienda in Spain.

What about winter fuel payments?

Funnily enough, pensioners living in Spain are still eligible for receiving winter fuel payments if they were still living in the UK the week leading up to 26th September 2004.

What are QROPS?

QROPS are Qualifying Recognised Overseas Pension Schemes which are set up outside the UK. HM Revenue and Customs allows for UK pensions of non-UK residents to be transferred into recognised and approved QROPS and it may be beneficial for some people to do this.

What are the benefits of QROPS?

Before considering transferring a UK pension into QROPS you should get tax advice but the main benefits are:-
You can move your pension to an offshore location such as Guernsey.
You are not required to buy an annuity.
Freedom to invest in many different things including property.
Access to tax-free cash.
Better death benefits.
Some of these benefits are only applicable if you have have been a non-UK resident for five UK financial years (April to April).

How can I find out more about QROPS?

Blevins Franks are an international company giving financial advice to expats and the DWP should be able to advise you on pension issues.

As you can see, the subject of pensions can be confusing, so make sure that you get proper financial advice from someone who knows about UK tax and Spanish tax. This article is no substitute for getting advice fro a professional.