Receiving your UK pension in Spain (sponsored contribution)
If you are a Spanish resident with a UK private pension, your pension is likely to be taxed in the UK before being paid to you in Spain.
Simply transferring your pension into a scheme called a QROPS could mean your tax liability is reduced. Where you would normally be paying between 20-50% in UK Income Tax, by choosing a QROPS hosted in a country such as Malta your pension income can be paid gross, with no tax deducted at source.
What is a QROPS?
A QROPS (Qualifying Recognised Overseas Pension Scheme) is an overseas pension scheme into which UK pensions can be transferred. Your pension will leave the UK and will instead move to one (whichever may be the most suitable) of a choice of jurisdictions. The country in which your QROPS is then located does not have to be your new country of residence, therefore as a Spanish resident, you have the choice of a number of jurisdictions.
The decision regarding which QROPS jurisdiction is most appropriate for you would normally depend on a number of factors, the most important of which are the tax rules in both your chosen QROPS jurisdiction, and your country of residence, and how they work together.
If you are considering transferring your UK pension, it is important that you take the time to ensure the jurisdiction chosen is also in the EU as a transfer to a non-EU jurisdiction could produce a tax charge on transfer. A Malta QROPS for example is likely to be more tax-efficient than a non-EU QROPS. This is where advice from experts who understand your individual needs is essential.
What you will have to pay
You will need advice choosing your QROPS, from a qualified adviser. Depending on the complexities of your circumstances, and how many pensions you are collating in the one QROPS, the fees will vary. There will be a one-off, set-up fee which can range from a few hundred pounds to a few thousand. Further to this, most pension trustees will charge an annual admin fee of anywhere up to 2% of the pension value. (STM Fidecs, for example, charges just 0.25% per year.)
Further benefits of a QROPS
In addition to potentially reducing Income Tax liability, QROPS also provide you with:
- Greater investment choice ● Currency options
- Consolidation of pensions schemes ● Potential lump sums/income advantages
- Income Tax saving
- Pension fund can be passed to your beneficiaries free from UK Death Taxes
Choosing your provider
One last important thing to remember is that circumstances change. There may be changes in QROPS legislation in different jurisdictions or changes in the Spanish tax regime, and this is where your choice of QROPS provider is key, as they will need to keep you up to date with any changes which may affect your individual situation. Be sure that you have put your pension in the hands of a good provider.
For a confidential discussion about your pension, please contact our Gibraltar office:
T: +350 200 51356
or visit www.stm-qrops.com/qrops-guide and download your free guide to QROPS.