QROPS Spain | UK pension Transfers to Spain in 2020

QROPS Spain

Transferring a UK Pension to Spain

There are no QROPS in Spain on the UK government’s recognised overseas pension schemes notification list ( 3rd July, 2020).

For residents in Europe, we recommend transferring a UK pension scheme to a QROPS in Malta. This is a regulated pension scheme and retirement benefits can be received anywhere throughout the European Economic Area (EEA) with no tax deducted at source.

Moving to Spain | UK Pension Transfers to a European Pension Scheme

If you are moving to Spain, it is advisable to transfer your pension from a retirement portfolio based in GBP to a retirement portfolio based in EUR.

We recommend transferring UK pensions to a QROPS in Malta. Pensions in Malta are regulated by the Malta Financial Services Authority (MFSA).

Your pension monies can be paid out in EUR to a local bank in Spain.

Why Transfer to a QROPS in Spain?

Reasons you may want to move your pension fund (also known as a ‘pension pot’) overseas to a QROPS:

  • your UK pension scheme is being closed or wound up
  • you want to transfer to a better pension scheme
  • you have pensions from more than one employer and want to bring your pension together under one platform which is more easily managed
  • you’re moving to Spain and want to move your UK pension to a pension scheme in Europe
  • you are already resident in Spain and want to move your UK pension to a pension scheme in Europe
  • you want to move your pension out of the UK and into a regulated pension scheme in Malta
  • you want to move your pension out of a UK retirement portfolio in GBP to a European retirement portfolio in EUR

Tax on a Malta QROPS for Residents in Spain

  • No tax on death at source
  • No tax on growth
  • There is a double taxation agreement between Spain and Malta
  • Local taxes in Spain apply when receiving retirement benefits

Tax on Transfer

There is no tax on transfer under current rules. 

However, there is an Overseas Tax Charge (OTC) which can apply if you leave the European Economic Area (EEA) within five years of transferring your pension scheme.

The European Economic Area (EEA) is made up of any EU member state including Spain, as well as Liechtenstein, Norway and Iceland.

So, only move your pension scheme to a QROPS in Malta if you intend to stay in Europe for a period of five years or more, otherwise there is a 25% Overseas Tax Charge or “exit tax” which will be applied.

How to Transfer My UK Pension to a QROPS

Please contact a regulated adviser who will provide you with the necessary forms to begin the process. Your adviser will guide you through the process and make recommendations based on your circumstances.

What happens to my QROPS in Malta if I return to the UK?

If you ever return to become resident in the UK, you have the ability to transfer your pension back to a UK Self Invested Personal Pension (SIPP) or you can leave your pension in a QROPS in Malta, however it would incur UK tax.

Please contact us for more information.

Which UK Pensions Are Taxed in Spain?

If you are tax resident in Spain, your UK state pension and any occupational pension income will be taxable only in Spain and not in the UK, under the terms of the UK-Spain Double Taxation Treaty. 

UK Government service funded pensions (for example, civil service, local government schemes, fire service, police and most teachers) remain liable only to UK tax and are not taxable in Spain.

Funded public sector schemes can be transferred to a QROPS.

Unfunded public sector schemes (e.g. NHS, civil service, teachers and armed forces) cannot be transferred to a QROPS.  

Income Tax in Spain (2019)

Savings taxable income is taxed at the following rates:

  • 19% for the first EUR 6,000 of taxable income.
  • 21% for the following EUR 6,000 to EUR 50,000 of taxable income.
  • 23% for any amounts over EUR 50,000.

For general taxable income, progressive tax rates are applied (which are the sum of the applicable rate approved by the state and the applicable rate approved by each autonomous community of Spain in their progressive tax rate scales). Tax liability may therefore differ from one autonomous community to another.

The following tables show the tax scale for withholdings approved by the state. This scale can be used as a guideline of the progressive tax rates applicable for the general taxable base. For the reasons stated above, the scale applicable in the corresponding autonomous community of Spain should always be consulted to calculate the total progressive tax rate.

Tax scale for withholdings applicable in 2019:

i) General Income:

 

Rate Bands

Income Tax Rate in 2019 

 

 
 

EUR

                                       %    

0 – 12,450

19%

 

 

12,450 – 20,200

24%

 

 

20,200 – 35,200

30%

   

35,200 – 60,000

37%

   

60,000+

45%

   

These rates apply to general taxable income. Different rates may apply depending on the region (“Comunidad Autónoma”) where the taxpayer is resident and will be applied on the taxpayer’s annual income tax return.

Please contact us for more information concerning QROPS.

UK Pension Transfers to Europe

UK pensions can be transferred to a QROPS in Malta.

Malta is a European country with over 70 Double Taxation Agreements including all the European Economic Area (EEA) countries. A QROPS in Malta is regulated by the Malta Financial Services Authority.

Both private and some public pension schemes can be transferred to Europe.

Unfunded public pension schemes such as the NHS, police, armed forces and civil service pensions cannot be transferred to a QROPS in Europe.

List of European Economic Area Countries

A QROPS in Malta has a Double Taxation Agreement in place with the following countries:

  • Austria
  • Belgium
  • Bulgaria
  • Croatia
  • Republic of Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Finland France
  • Germany
  • Greece
  • Hungary
  • Ireland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Poland
  • Portugal
  • Romania
  • Slovakia
  • Slovenia
  • Spain
  • Sweden

Tax will be deducted at source in Malta and local taxes will apply.

Can a State Pension Be Transferred to a QROPS?

State pensions cannot be transferred to QROPS, but state pensions can be paid into your local bank account in Europe. Please click below to claim your pension abroad and get a pension forecast.

https://www.gov.uk/state-pension-if-you-retire-abroad

https://www.gov.uk/state-pension-if-you-retire-abroad

Can I Get My State Pension Paid into the UK and in Europe?

No, you must choose which country you want your pension to be paid in. You cannot be paid in one country for part of the year and a different country for the rest of the year.

Your UK State Pension can be paid into:

  • a bank in the country in Europe where you are currently living or
  • a bank or building society in the UK

You can use:

  • an account in your name
  • a joint account
  • someone else’s account – if you have their permission and keep to the terms and conditions of the account

You’ll need the international bank account number (IBAN) and bank identification code (BIC) numbers of your bank account in Europe.

You’ll be paid in EUR – the amount you get may change due to exchange rates which will fluctuate over time.

Will I Still Get My UK State Pension Paid Abroad after Brexit?

Yes. Retirees will still be entitled to the state pension they have built up, but it may be that those pension payments are frozen. Under current rules, if you live in the European Economic Area, your pension rises with inflation under the “triple lock” rule.

The arrangements to apply in future have been part of the negotiations under Article 50 on the UK’s withdrawal from the EU. A joint report on progress published on 8 December 2017 said that, with the caveat that “nothing is agreed until everything is agreed”, the Withdrawal Agreement would include a commitment to social security co-ordination.

.. As a result, UK state pension payouts should not be affected in any material way by Brexit. You can read the full parliamentary paper here.

The Financial Times includes a statement from Baroness Buscombe, undersecretary of state with the department for work and pensions , that UK State pensions will increase in line with inflation in 2019/20 despite a “no deal” Brexit.

It is still unclear whether exiting the EU will mean the end of the triple lock arrangement for state pensions in the long run, as the UK would need to negotiate reciprocal arrangements with individual EU nations.

Will My Company Pension Scheme Be Affected by Brexit?

Defined benefit, occupational or final salary pension schemes are based on an arrangement between an employer and employee. As a result, they should not be affected in any material way by Brexit. However, if you move abroad to Europe, you may wish to consider moving your pension to a regulated European pension scheme.

Please read the following article about moving a final salary pension scheme abroad.

Will My UK Pension Scheme Be Affected by Brexit?

Huw Evans, director general of the Association of British Insurers, raised serious concerns about UK pension payments if there is a hard-Brexit.

He said several EU nations currently do not have legal frameworks in place to deal with UK pension payments in a post-Brexit world.

He said the Bank of England has estimated that there are about 38 million pension and life policyholders who will be affected by this issue.

“This is highly material, and there is the related issue that in future, if UK citizens retire to an EU country and they have an insurance-based pension which is paid to them in the domestic bank account of the current country in which they reside, that may also be deemed illegal if there is not an arrangement found for this route,” Evans said.

A ‘No Deal’ Brexit could mean that private UK companies have problems paying out, for example, an annuity to a UK citizen in the EU. There could be cost issues and the question of exchange rates for companies transferring money. The Association of British Insurers (ABI) states that this issue can be solved by a ‘cooperation between EU and UK regulators’, but this issue has not been resolved yet. If this were to happen, expats could continue to draw out their private pensions without issue.  

UK Pension Transfers to a European QROPS

If you are moving to Europe and intend to retire permanently in Europe or abroad, you may wish to consider moving your pension out of a regulated penson scheme in the UK and into a regulated pension scheme in Europe.

You can move your pension out of a pension set up in pounds sterling and into a pension scheme set up in euros. Between the summer of 2015 and 2018, the pound lost over 20% in value against the euro.

For more information, please contact us.

Transferring a Final Salary Pension Scheme to a QROPS

Transferring a Defined Benefit Pension Scheme to a QROPS

The Financial Conduct Authority (FCA) have written a report concerning transfers of final salary pension schemes abroad.

In the 58 page report, PS 18/20,  regarding safeguarded benefits on 4th October, 2018, Christopher Woolard, FCA’s Executive Director of Strategy and Competition said:

“These new rules will mean advisers have greater certainty and confidence in what we expect when they offer pension transfer advice.

“We expect our interventions to improve the quality of advice which will help to reduce the number of complaints against advisory firms. We will measure consumer outcomes through our supervisory work.”

“Any changes to our rules on contingent charging could have implications for the supply of advice. Because of the significance of this issue to all stakeholders in the market, we will carry out further analysis and consult on new interventions if appropriate in the first half of next year.”

HMRC are discouraging final salary defined benefit pension schemes from being transferred to defined contribution pension schemes, even if members are moving overseas and it is written all over the report. This is because final salary pension schemes give clients a guaranteed income for life which usually rises in line with inflation along with other safeguarded benefits.

Although, there can be reasons for transferring your final salary pension scheme abroad including ill health, inheritance planning and currency planning issues.

Further Highlights in the Report

New pension guidance in report PS 18/20 following on from PS 18/7. Here are some highlights.

“Defined Benefit (DB) pensions, and other safeguarded benefits involving guaranteed income, provide valuable benefits. Most consumers will be best advised to keep them. There is potential for significant consumer harm if consumers who are considering giving up these benefits are given unsuitable advice. ”

“Since the introduction of pension freedoms in 2015, there has been a considerable increase in the demand for pension transfer advice and in the volume of actual transfers”

“While most consumers will be best advised to keep their DB pensions and other safeguarded benefits, we recognise that the pensions environment has changed. This is particularly the case since the pension freedoms gave consumers with Defined Contribution (DC) pensions more options to access their pension savings. As a result, there has been an increased demand for pension transfer advice, as advice is mandatory under government legislation for potential transfers valued at more than £30,000.”

“Over 6 million people are eligible to transfer deferred benefits out of DB schemes. Transfer values have been at record high levels since 2016, with employee benefit consultancies reporting the average size of transfer at over £250,000. In the Cost Benefit Analysis (CBA) in CP18/7, we estimated that 100,000 members are transferring out of their DB scheme each year”

“We expect fewer complaints against advisory firms and fewer customers becoming the victims of pension scams. We have continued our work on preventing pension scams, including scams involving pension transfer advice, and we recently updated our ScamSmart website pages”.

Transferring a Defined Contribution Scheme Abroad

For defined contribution scheme transfers, please contact us for more information.

The Race to Retire in Europe

The Race to Retire in Europe

The official “transition date” for Brexit was 29th March, 2019 and many Brits are looking to retire in Europe to try to solidify their EU status and any rights they might have before all the deals are set in ink.

After the official Brexit day on 29th March 2019, the UK will enter an ‘implementation phase’. This will last until 31st December 2020.

The Best Places to Retire in Europe

  1. Portugal – There is a flat rate of tax of 10% on your income for the first 10 years if you move to Portugal. Read more here: UK pension transfers to Portugal.
  2. Spain – Transfer your pension to a QROPS in Europe in EUR. Click here for more information on UK pension transfers to Spain.
  3. France – If you are moving to France, you may wish to consider moving your pension to a regulated scheme in Europe. See UK pension transfers to France.
  4. Cyprus – Foreign income and foreign pensions are taxed at a flat rate of only 5% in Cyprus. See UK pension transfers to Cyprus.
  5. Malta – Foreign income is taxed at a flat rate of 15% if remitted from abroad. There’s no inheritance tax, no gift tax and no wealth tax in Malta.
  6. Italy – There may be some tax advantages for retirees moving to Italy. Read more at QROPS in Italy.
  7. Bulgaria – One of the cheapest places to live and buy houses in Europe. Income tax if a flat rate of only 10%. Read more at UK pension transfers to Bulgaria.

retire in europe

Moving Your UK Pension to Europe | Brexit

The UK state pension cannot be moved to a QROPS, but private sector pension schemes regulated in the UK can be transferred abroad to a regulated pension scheme in Europe.

British expats already resident in France have been told they will retain the right to stay in France and British pensioners have been told they will have their healthcare covered in France.

But, no one knows what the deal will look like for those Brits who want to move or retire in France after Brexit.

It may be the case that British residents in Europe have to purchase their own health insurance.

Under the draft withdrawal agreement between the UK and the EU, Brits can move to France legally until the end of the transition period scheduled for December 2020.

The Remain in France Together group, which advises on citizens’ rights of British nationals in France, has this advice for Brits who are thinking of moving to France:

“If you already know that you want to move to France in the future, the best advice that we can possibly give you is to do this before the end of transition period on 31 December 2020.”

“If you do this, you will benefit from the Withdrawal Agreement; you’ll become part of the group whose rights to residence are protected for their lifetimes.”

The existence of the December 2020 cut off point has persuaded many Britons to speed up their move across the Channel.

Anyone retired or not employed would have to show they have sufficient resources, which currently stands at 1,170 EUR per month as well as forking out the hefty sum of €269 for the French residency permit, the Titre de Séjour. In Spain, it is around 2,130 EUR per month and an additional 533 EUR per dependent, whilst in Greece it is only €4,000 per person in savings in a Greek bank account.

retire to europe

Will I Still Get Free State Healthcare in Europe After Brexit?

For healthcare, it may be the case that people who move after Brexit will lose the chance to be treated for free in a European hospital via the European Health Insurance Card (EHIC) which entitles you to free access for medical treatment in Europe .There is a chance that in a “no deal” Brexit, the EHIC would be revoked after Brexit. The card covers pre-existing medical conditions as well as emergency care for British expats in Europe, if you have an accident or become ill on holiday.

A House of Lords report by the European Union Committee, in March 2018, warned that, “in the absence of an agreement on future relations that covers this topic, the rights currently enjoyed by 27 million UK citizens, thanks to the EHIC, will cease after Brexit”.

As The Independent revealed, medical charities have warned that 29,000 kidney dialysis patients who can currently get the treatment they need while abroad would face costs of more than £800 a week if the card goes, effectively putting holidays and rest breaks out of reach for people on ordinary incomes. As it is a pre-existing condition, insurance companies will not cover the treatment.

In the event of no successor to the EHIC card: “The many people with long-term conditions, including kidney patients, and people with disabilities, will be particularly affected, given the prohibitive costs of travel insurance that they face.”

If that were to be the case, 27 million Brits living in Europe would have to purchase some form of health insurance. This can be quite cheap to purchase social health insurance in some countries, but not others.

Insurance premiums for private health insurance will depend on age, country, deductibles and medical provision received but, you can expect around 700 EUR – 1,000 EUR per month on average for private health insurance in Europe. As mentioned above, it may be cost prohibitive or not cover those with pre-existing conditions.

QROPS After Brexit – 25% Exit Tax if You Transfer Your Pension to EU?

QROPS Post Brexit – Exit Tax Issues

QROPS and Brexit. Can you transfer a UK pension to the EU after Brexit? Will there be a tax on a UK pension transferred to the EU after Brexit? Can someone in the EU access their UK pension scheme after Brexit?

There have been two very interesting posts in the Financial times over the last week on September 13th and September 14th. Obviously, with Brexit on the horizon with the actual date of the UK leaving the EU scheduled for March 2019, but likely postponed until December 2020, it is becoming increasingly important for expats and potential expats to re-examine their retirement portfolio set up.

With it looking more and more like a hard Brexit on the doorstep, it is important to try to make sense of what to do with your retirement benefits and make a decision of where you wish to live after Brexit and how taxes might affect your pension plans.

Why Did HMRC Introduce the 25% Exit Tax?

According to HMRC, it was to avoid tax abuses. But, people moving to Australia or New Zealand get an unfair advantage by paying no tax on their pension at retirement. Neither Australia or NZ tax you on retirement benefits received.

If you move to Portugal, you can move your pension to a third country in Malta and only pay Portugese income tax, which is zero for the first 10 years if you become a Non-Habitual Resident, but if you move to Asia, for example, you could be paying both UK income tax and tax in your country of residence in Asia, plus a tax on death despite not living in the UK.

HMRC have skewered the rules in a fashion which makes sense to HMRC, but not many others. QROPS is not a viable option unless you are moving to Australia, New Zealand, India or Europe due to the punitive 25% tax on exit. You can see more here on the history of QROPS and its timeline from 2006 – 2018.

Will There Be a 25% Exit Tax in Europe?

What will happen when Britain leaves Europe? Will there be an exit tax? This has been a question for many pensioners, as well as whether they will face a tax on their European pensions or QROPS if they ever settle back in the UK. Well, no-one knows the answer, but there have been clues from the Treasury.

Exit Tax on UK Pension Transfers Post Brexit

First, let’s get delve into the articles from the Financial Times.

In his answer to a written question from Labour MP for Bristol West, Thangam Debbonaire, the economic secretary to the Treasury, John Glen, stated the tax status of [transfers to QROPS] would depend on the Brexit deal achieved.

He wrote: “The regulations that allow a tax-free transfer of a private pension scheme to a Qrop within the EEA are domestic law which currently comply with EU fundamental freedoms.

“Whether or not these transfers will be exempt from the overseas transfer charge once the UK leaves the EU is dependent upon the terms of future exit agreement between the UK Government and the EU.”

In March 2017, a 25% exit tax on transfers to QROPS outside of the EEA was introduced by then-chancellor of the exchequer Philip Hammond to deter individuals from moving their pensions overseas to avoid tax.

As mentioned before, this has penalised people who are moving to USA, Canada, Switzerland, Africa, Asia, the Middle East and Latin America who do not have any local QROPS options.

The 25% exit charge applies unless both the individual and the Qrops are in the same country after the transfer, or the Qrops is in one country in the European Economic Area (EEA) and the individual is resident in another EEA after the transfer.

In other words, if you are moving to Europe, you can transfer your pension to a QROPS in Malta and usually, you will only pay tax in your country of residence in Europe, for example, Portugal. Currently, many British expats are moving to Portugal, Australia and New Zealand in order to pay 0% income tax on their pensions. HMRC have skewered the results of where expats are deciding to retire abroad.

Since the 25% exit tax, QROPS transfers have dropped by a half.

An overseas pension transfer charge to Europe would kill off what little there is left of the QROPS market. But, if you look a the timeline of QROPS transfers, you can see where this is likely going. HMRC want you to spend money in the UK, taxed in the UK.

Will You Even Be Able to Transfer a UK Pension to a QROPS in the EU (Malta) After Brexit?

The Financial Times continues…

In a written answer to Parliament, Guy Opperman, minister for pensions and financial inclusion, said the current rights of citizen in transferring their pensions to overseas pension schemes will be maintained, even under a no deal Brexit.

He said: “The UK and EU have already agreed the terms of an implementation period lasting until the end of 2020.

“During this implementation period, access to one another’s markets will remain unchanged and on the current terms, ensuring continuity for consumers and businesses.”

After Brexit, he said, “whether they are a UK citizen or a non-UK EU citizen, they will continue to be able to transfer their pensions to overseas pension schemes.

“Equally, UK pension schemes will continue to be able to receive transfers from overseas pension schemes.”

However, the conditions cannot be guaranteed. In other words, there could be an exit tax and if it is similar to other countries, that will be a 25% exit tax on transferring to the EU. That would keep it “fair” in the mind of HMRC and deter workers from retiring abroad, keeping money in the UK. 

Note: this is my opinion only and in no way reflects the opinion or position of HMRC.

Will I Be Able to Access My UK Pension in Europe After Brexit?

I would guess they will come to an agreement on this, but again it is not a foregone conclusion.

The FT has an article in August, where the government confirmed that about 220,000 UK citizens aged 65 plus living in the EEA could lose access to their UK pension schemes in a no-deal Brexit situation.

It said British expats “may lose the ability to access existing lending and deposit services, insurance contracts (such as a life insurance contract and annuities) due to UK firms losing their rights to passport into the EEA, affecting the ability of their EEA customers to continue accessing their services”.

According to figures from the Office for National Statistics (ONS), there are 900,000 Brits currently living in the EU, of which 220,000 are aged 65 plus.

A transfer out of a UK pension scheme into a Malta QROPS before Brexit would guarantee your pension is held under EU law.