Pro - You take your pension outside the UK tax regime so no tax at source
Con - You still have to pay tax on your pension income in Spain although the position may be more favorable due to the way Hacienda looks upon this type of income.
Pro - No 45% tax on your pension after your death (UK pension lump sums left to beneficiaries are likely to attract their highest rate of tax).
Con - If you die before the age of 75 there is no tax in the UK either - but most people believe they will live beyond this age.
Pro - UK legislation allows full flexibility to EU based QROPS. Malta - one of the best QROPS jurisdictions for Spanish residents has changed its local laws to also allow the same flexibility.
Con - None.
Pro - You can consolidate all your pensions into one, easy to understand, qualifying overseas scheme.
Con - If one of your pensions is a government unfunded scheme such as from the NHS, Police, teachers or civil service it will not be possible to transfer this pension following 2015 pension legislation changes by the UK government.
Pro - There are no lifetime allowance restrictions with qualifying overseas schemes. In the UK the allowance is being reduced and is currently £1 million.
Con - This only effects people with large pension pots.
Pro - You can have your international pension in Euros therefore removing your exposure to currency fluctuations. Especially if the GBP becomes weak against the Euro.
Con - If the GBP gets stronger you could miss out on more favorable exchange rates.
Pro - You can remove your pension from the UK if your scheme is one of the many with a large deficit
Con - If it is a defined benefit (final salary) pension you also need to take FCA regulated advice which can be difficult if you don´t live in the UK. Please speak to us about this.
Pro - A final salary scheme usually only allows a spouse 50% of your pension when you die whereas an overseas scheme offers 100% to your beneficiaries.
Con - The final salary scheme will give a defined, guaranteed amount whilst the scheme remains able whereas the overseas scheme pays out what is left in the pension pot after death - which could be more or less than the original spousal allowance.
Pro - Qualifying recognised overseas pension schemes (QROPS) do not form part of a UK inheritance tax liability. This liability is based on your domicile, not your country of residence. Most British citizens living in Spain will still be UK domiciled.
Con - Transfers between married couples and civil partners are not subject to IHT in the UK but large estates passed on to other beneficiaries could be.
Pro - A greater investment choice with QROPS affording the ability to tailor a portfolio more to meet your individual needs.
Con - This may not be of interest to you.
Pro - You can partly protect your pension from future negative legislation changes by the government on UK pensions.
Con - You may miss out on positive changes, should there be any.
Pro - If you are in divorce proceedings or company liquidation your UK pension could be at risk. A QROPS, being based outside the UK is better protected.
Con - This may not apply to you.
Is it for you?
If you live in Spain or are thinking of making the move and have one or more UK pensions you may wish to consider the benefits of transferring to a qualifying recognised overseas pension scheme (QROPS) or perhaps an international SIPP with a provider who allows a free move to an overseas scheme at a later date. However, it´s not the right choice in all circumstances so we have set out a list of advantages and disadvantages on this page to help you decide if it could be something for you.
There were a raft of legislative changes in UK pensions in 2015 so more than ever it is vital to get qualified advice from a regulated company in order to make the right decision. There was also further changes announced in March 2017 to QROPS and non EEA countries which you should be aware of. For a no obligation assessment of your own circumstances and further information please call Blacktower in Spain on 951 390 201.