Spain is a popular choice not only for expatriates to live and work but also for retirement. The warm temperate climate, friendly local communities and excellent quality of life make Spain an ideal place for retirement.
In order to enjoy life in Spain as a retiree, there are several retirement planning considerations you need to understand. These include but are not limited to local tax laws, overseas pension drawdown rules, visa requirements, currency conversion into Euros and healthcare provisions.
The earlier you develop an understanding of how all of these considerations will affect you, the more enjoyable your retirement is likely to be. Conversely, the longer you delay taking action, the more risk you take of entering retirement unprepared.
The common catchphrase 'what you don't know, can't hurt you' could not be further from the truth when it comes to retirement planning in Spain.
deVere Spain specialises in helping clients build a pathway to their dream retirement, by ensuring the best possible retirement plan solutions are implemented when required.
At deVere Spain - part of the deVere Group - we believe that the moment you reach that age of retirement should be the same moment you can finally reap the benefits you worked so hard to achieve. Furthermore, we understand the appeal of holding your retirement abroad.
However you might find that retiring overseas could place you in a challenging position, especially when considering the true costs needed to support the desired lifestyle you would like to have during your retirement.
Our financial advisers in Spain can help you identify these factors, highlighting key areas to work on through sound advice
With the resources granted by the deVere Group, a leading financial advisory firm, we can carefully construct tailored pension planning options that consider your needs and requirements whilst encouraging efficiency against the taxation in Spain.
Some of the questions you may have regarding retirement planning include:
When should I start saving?
What are the implications if I delay?
Should I join my Employer's scheme?
How much should I contribute?
Am I contributing enough?
How much am I likely to receive?
Can I be more tax efficient and pay more in?
Taking the decision to retire in a foreign country also means that you have made the decision not to return to your home country. This may seem obvious but - perhaps unbeknown to you - this brings with it a wide range of international protection services and investment opportunities which you can make use of.
Some of the options available to expats who plan to retire abroad include:
Qualifying Recognised Overseas Pensions (QROPs)
Qualifying Non-UK Pensions (QNUPs)
Regular savings plans
Drawing Pension Benefits
Advice on drawing pension benefits should always be issued by a qualified professional who will review your circumstances and take into account your requirements to help you ensure that you're making the right choice.
When you are ready to take the benefits, we are here to answer the following questions:
Should I take the Pension Commencement Lump Sum (PCLS) available?
Do I buy an annuity or enter into a drawdown contract?
What are the options, such as phased retirement, that are available
What are QROPS?
A QROPS (Qualifying Recognised Overseas Pension Scheme) is a pension transfer scheme that is recognised by HMRC and meets certain conditions and standards equivalent to a UK pension. Any UK pension can be readily transferred into an overseas scheme, provided that the overseas scheme is registered with HMRC as a QROPS, and meets the requirements of the jurisdiction in which it is domiciled.
Is a QROPS suitable for me?
If you have a UK pension, have left the UK, plan to leave, or are a resident but not UK domiciled, a QROPS is one of the most favourable pension schemes available to you. However, obtaining professional financial advice is a must to ensure that you do comply with the rules.
Why should I choose a QROPS?
QROPS give you more control over where your pension fund is invested, allows you to consolidate a number of pensions into one QROPS and does not require you to buy into an annuity.
Furthermore, the remaining fund is left to your beneficiaries without any deduction of UK tax upon death.
What are the key benefits of a QROPS through the deVere Group?
No need to buy an annuity
Funds passed to beneficiaries in full after death: after completing 5 full tax years of non UK Tax residency, your pension will no longer be liable to UK income tax or death charges of up to 45%
Flexible choice of currency your pension can be paid in
Up to 30% pension commencement lump sum
Greater investment freedom
Pensions can be consolidated in to one
Free from UK lump sum death benefit charge
Some jurisdiction allow your pension income to be paid gross
If I am residing in Spain, which is the best QROPS jurisdiction for me?
Following the Finance Act 2012, the QROPS jurisdiction of choice for Spanish residents is Malta. Malta is highly-regulated, has a sophisticated and transparent tax system and is an integral member of the European Union.
Please note if you become resident outside of the EEA within 5 years of the transfer to a EU QROPS, there is likely to be a retrospective tax charge.
Qualifying Non-UK Pension Scheme - QNUPS
Cash and assets that are non-UK tax relieved can be contributed into a Qualifying Non-UK Pension Scheme, or QNUPS, providing significant opportunities for British domiciles, irrespective of whether they are resident in the UK or are expatriates.
A QNUPS offers an excellent vehicle to top-up the overall amount of assets that need to be set aside for a comfortable retirement. Based on your current holdings and lifestyle, an actuary will be able to establish the level of retirement benefits required to sustain your standard of living in retirement and recommend a sustainable funding level of contributions to the QNUPS.
QNUPS can offer some great benefits, especially the extraction of wealth in a tax-efficient manner which is usually the most difficult issue to solve.
The key points of a Qualifying Non-UK Pension Scheme:
Depending on your circumstances, it may be possible to contribute to a QNUPS after you have retired.
The pension fund can be used by the member during his lifetime and any remaining balance can be passed on to their chosen heirs upon the member's death.
You do not need to have any earned income from employment in order to make a contribution.
There is no maximum contribution that can be made into a QNUPS.
As a full member of the European Union, Malta is one of the deVere Group's preferred jurisdictions for QNUPS. Here is a list of reasons:
Malta has been a successful full member of EU since 2004.
Pension administrators in Malta are all licensed.
Malta has met its full IFRS standards since 1997.
Malta is a member of the following reputable entities:
International Organisation of Securities Commission
International Association of Insurance Supervisors
European Banking Authority
European Insurance & Occupational Pensions Authority
European Securities Marketing Authority
Malta has a reputable comprehensive, legislative and regulatory framework through the Malta Financial Services Authority.
Malta enjoys a sophisticated ICT Infrastructure.
Malta offers investor protection through a vast tax treaty network with over 59 Double Tax Treaties at the time of writing.
Who can benefit from a QNUPS?
A QNUPS is ideal for both UK residents and non-UK residents who still maintain a UK Inheritance Tax (IHT) exposure. Most British citizens living overseas are still exposed to IHT, as domicile status is very difficult to lose. All British domiciles are taxed 40% IHT on their worldwide estate when they die.
With UK retirement rates being at near record lows, even individuals who have a fully funded UK pension in line with the current Lifetime Allowance limit (£1.5 million) can find that they do not have a large enough retirement pot to satisfy their retirement needs. A QNUPS therefore creates an ideal vehicle to build an individual's retirement provisions in line with their retirement income expectations.
Since QNUPS are not subject to lifetime allowance limits there will not be the same severe tax penalties that a UK resident will suffer should they fund their UK registered schemes over the lifetime allowance limit.
A QNUPS is also ideal for individuals who spend large amounts of time in more than one country, as it allows them to create a fully international and passport-able retirement plan that can be contributed to and accessed irrespective of where the individual resides.
While both UK residents and expats creating a QNUPS should do so for retirement provisions, any funds that remain in the QNUPS on death do not attract a UK IHT charge and can be passed to beneficiaries of the member's choice rather than being distributed in accordance with their will.
To find out more contact deVere Spain, part of deVere Group, for a no-obligation consultation.