I Have Moved To Spain – What Should I Do With My UK Pension?

Moving to Spain is exciting. Your pension, however, probably wasn’t designed with the move in mind.

For many people, a UK pension is one of their largest assets. So, after becoming resident in Spain, it is natural to ask whether the pension should now be transferred to a Spanish or international arrangement.

But there is an important question to ask first:

Does it actually need to move?

The answer isn’t necessarily yes.

Do I need to transfer my UK pension?

Moving to Spain does not automatically mean that your UK pension needs to be transferred overseas.

Depending on your circumstances, you may be able to leave your pension in the UK and continue to manage it from Spain. In some cases, that may be the most appropriate option.

Before considering a transfer, it is important to understand what you already have, including:

• The type and value of your pension
• The investments and charges
• Any guarantees or valuable benefits
• When you can access the pension
• How you expect to use it in retirement
• Whether you may eventually return to the UK

A transfer should therefore be a financial planning decision, rather than simply a consequence of moving country.

What happens to the tax?

Becoming Spanish tax resident can change the way your pension income is treated.

The UK and Spain have a double taxation agreement, and the precise treatment depends on the type of pension and your circumstances. Private pensions and government-service pensions can also be treated differently.

This is why simply looking at where your pension provider is based isn’t enough.

Your tax residency, the type of pension and how you intend to take the benefits all need to be considered together.

What about my UK State Pension?

Your UK State Pension can generally continue to be paid while you live in Spain, subject to the relevant rules.

But your State Pension is only one part of your retirement income.

Your wider retirement plan might also include workplace pensions, personal pensions, SIPPs, investments, property or cash savings.

The important question is therefore not just:

“What will my pension pay me?”

but:

“How will all my sources of retirement income work together?”

Should I transfer my pension overseas?

This is where it is particularly important not to rush.

Certain overseas pension transfers can be subject to a 25% overseas transfer charge, depending on the circumstances, although exemptions and allowances can apply.

There can also be valuable benefits or guarantees attached to an existing pension that could be lost following a transfer.

So rather than asking:

“Can I transfer my pension?”

the better question is:

“What would I gain by transferring, and what could I potentially lose?”

What should I review?

Even if you decide not to transfer your pension, moving to Spain is a good reason to review your overall retirement arrangements.

Consider:

• Is the investment strategy still appropriate?
• Are the charges reasonable?
• Is the level of risk suitable?
• How will the pension provide the income you need?
• How does it fit with your other investments?
• What happens if you eventually return to the UK?
• Have your retirement plans changed since moving to Spain?

These questions become particularly important as you approach retirement.

So, what should I do?

If you’ve recently moved to Spain with a UK pension, I wouldn’t start by asking which provider you should transfer to.

I’d start by understanding what you already have and how it fits into your new life in Spain.

For some people, the best decision may be to leave their UK pension exactly where it is. For others, a review may identify opportunities to improve the investment strategy, charges, flexibility or overall retirement plan.

Moving to Spain doesn’t automatically mean your pension needs to move. But your financial plan probably deserves to move with you.

Have you reviewed your pension since moving to Spain?

If you’ve recently become resident in Spain and haven’t reviewed your UK pension and wider retirement planning, I would be happy to have an initial conversation with you.

At The Spectrum IFA Group, I work with expatriates living in Spain to review their pensions, investments and retirement plans, taking into account their circumstances in both the UK and Spain.