How to transfer UK pension to Spain

Dreaming of a sun-soaked retirement in Spain? While you’re making plans for your big move, one important thing to sort out is your pension.

You might want to look into transferring it from the UK to Spain, which will be especially useful if you’ll be relying on it for income while living there.

In this helpful guide, we’ll run through everything you need to know about how to transfer a UK pension to Spain. This includes the process and how to get started, which UK pensions are eligible for transfer, and some info on the potential costs and tax implications involved.

And remember, if you’re looking to move pension savings or other income across international borders, the Wise account is an ideal solution. It offers low transfer fees*, the mid-market exchange rate and a choice of 40+ currencies, as well as being safe and secure for transferring large sums.

Learn more about the Wise account

Can I transfer my UK pension to Spain?

Yes, you should be able to transfer your UK private or workplace pension overseas to Spain.

However, it all depends on the conditions and restrictions of your particular pension scheme. You’ll also need to move your pension to what is known as a Qualifying Recognised Overseas Pension Scheme (QROPS) in Spain.

This means that it’s on HMRC’s list of approved QROPS schemes. It makes it easier to transfer your pension abroad, and helps you avoid high transfer fees and taxes (although taxes and fees may still apply).

It can actually be the only way to transfer a UK pension abroad, as many UK pension providers won’t permit transfers to non-QROPS schemes.

Whatever your circumstances or retirement plans, it’s important to remember that transferring UK-based pensions abroad can have significant tax implications. These can sometimes be complex and costly, depending on the country you’re moving to.

To help you navigate these and understand your obligations, it’s recommended to speak to a pensions or tax specialist to get some expert advice.

Which UK pensions are eligible for transfer to Spain?

Not all types of UK pension are eligible for transfer to other countries.

You should be able to transfer workplace pensions and private pensions to Spain. This includes defined contribution and money purchase pensions.¹

But you’ll need to check the specific conditions of your pension - as some have restrictions on transfers.

It’s not possible to directly transfer your UK state pension to Spain though.

You can still receive your state pension payments while living there, as long as you’re up-to-date with your National Insurance (NI) contributions or meet other eligibility criteria such as having lived or worked abroad. You’ll just need to apply to the International Pension Centre within 4 months of your state pension age.²

If you have a civil service pension (i.e. as a teacher, NHS worker or police officer), you may face difficulties in transferring it abroad. You’ll need to contact your pension provider to find out about your options.

How to transfer your UK pension to Spain - a step by step guide

To transfer a UK pension to Spain, you’ll need to firstly check whether your particular pension scheme is eligible for transfer. Then you’ll need to find a QROPS in Spain, before completing the paperwork for the transfer. It could also be a good idea to seek professional financial advice at some stage too.

We’ll run through these steps in more detail in just a moment. But first, a quick explanation of what QROPS is and how it works.

Qualifying Recognised Overseas Pension Schemes (QROPS)

The most crucial part of transferring a UK pension overseas is finding a QROPS. These are pension schemes that have been vetted and approved by HMRC, and which allow UK nationals to transfer their pensions overseas.

Most UK pensions can only be moved to an HMRC-approved QROPS. It may be possible to move your pension to a non-QROPS scheme, but you’ll face a whopping 40% tax bill on the transfer.³

It’s important to note though that transferring your pension to a QROPS in Spain may not mean you avoid tax charges altogether.

Steps to transfer your pension

Now, let’s take a closer look at the steps you’ll need to take to transfer a UK pension to Spain:

1 - Find a QROPS in Spain

First up, you’ll need to check whether there are suitable QROPS available in the country you’re moving to. You can do this quickly and easily by checking the recognised overseas pension schemes notification list here. Sorted alphabetically by country, these are all the schemes that meet HMRC’s requirements to be a QROPS.

The good news is that Spain is on this list, although there is only one scheme on it at the moment - Itzarri EPSV de Empleo.⁴

2 - Make sure your UK pension allows overseas transfers

The next step is to contact your pension provider to find out if it permits transfers overseas - and specifically, to Spain. It should if it’s a QROPS you’re transferring to, but not every type of pension is eligible.

There may also be conditions, costs or other tax implications you need to know about before setting up the transfer.

3 - Complete the application form for the transfer

Once you’ve found a suitable QROPS, checked your pension conditions and perhaps also spoken to a financial advisor or pensions specialist, the final step is to apply for the transfer.

You’ll need to download and complete Form APSS 263 from the UK Government website. This asks for information such as:

• Your personal details and National Insurance number
• Address and contact information for you in the UK (or your previous UK address if you’ve already moved)
• Details of the QROPS - including the name, address, country in which the scheme is established and regulated and its HMRC reference number
• Your employment details (if relevant)

Once you’ve completed the form, you’ll need to submit it to your UK pension scheme administrator to start the transfer process.

It’s really important to provide all the information you’re asked for, and make sure it’s accurate. If you miss anything or you’re asked for further details, respond as quickly as you can.

If you fail to provide all the requested details within 60 days of submitting your form, your transfer will be taxed at 25% - whether or not you’re exempt from other taxes or charges.³

Timeframes and costs involved

The time it takes to transfer a UK pension overseas varies. It depends on the processes (and efficiency) of the pension providers involved in both countries, as well as how quickly you respond to requests for information.

To find out more about specific timeframes for your transfer, you’ll need to speak to your pension provider. It could also be worth speaking to the QROPS provider in Spain too. Don’t expect it to be super fast though, as pension transfers aren’t straightforward and they can take a while.

And are there any charges to transfer pensions overseas? There is one main fee you need to know about, which is the overseas transfer charge of 25%.

The good news though is that you shouldn’t have to pay it if you’re living in the same country as the QROPS you’re transferring to - and stay there for at least 5 years.³

There are some exceptions to this rule though. The tax charge will apply if your

transfer exceeds your overseas transfer allowance (OTA). Everyone gets this, and it’s currently set at £1,073,100 (although it can differ in some circumstances).

If you exceed your OTA, the 25% charge may be payable on the excess.³

Tax considerations of transferring your UK pension to Spain

Tax and pensions are hardly ever straightforward, and it becomes even more complicated when you’re navigating rules in more than one country.

This is why it’s always a good idea to get some professional advice before transferring a pension to another country.

But generally speaking, here’s what you need to know about tax when you move a UK pension to Spain.

If you’re living in the same country as the QROPS, you shouldn’t be liable for tax on the transfer. So if you’ve already moved to Spain and live there permanently, and transfer your UK pension to a Spain-based QROPS, you won’t have to pay this tax.³

The exception to this is if you make a transfer that exceeds your overseas transfer allowance (OTA) of £1,073,100, you’ll pay tax of 25% on the excess.³

Crucially, you’ll need to stay living in Spain, the UK or within the EEA for 5 years or again, the 25% tax charge will apply.³

And finally - a situation that is best avoided if possible. If you decide to transfer your pension to a non-QROPS (which is usually not permitted, but still technically possible), you’ll pay up to 40% tax on the whole of the transfer amount.³

Save money on pension transfers to Spain with Wise

After reading this guide, you should have a better idea of how to transfer your UK pension to Spain. We’ve looked at the steps, costs and taxes involved, as well as some of the key terminology you need to know about.

But it’s also important to think about how you’ll actually receive your pension sum in Spain. A key consideration is that your pension pot will need to be converted from British pounds (GBP) to euros (EUR).

If you use a local bank account, you could be stung by high currency conversion fees and poor exchange rates. As it’s likely to be a large amount you’re transferring, this could make a serious dent in your retirement funds.

Luckily, there’s a better solution available. Open a Wise account and you can manage your money in 40+ currencies, including GBP and EUR.

You can use it to send and receive money internationally, for low fees* and mid-market exchange rates.

This could be hugely useful for transferring your pension between countries, or even for receiving your UK state pension or other UK-based income while living in Spain.

Sign up with Wise today

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Sources used:

1. Online Money Advisor - Pension transfers from UK to Spain
2. GOV.UK - State Pension if you retire abroad
3. GOV.UK - Transferring your pension
4. GOV.UK - Check the recognised overseas pension schemes notification list

Sources last checked on date: 24-Sep-2024