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Should I keep my UK SIPP or transfer to QROPS? Image

Should I keep my UK SIPP or transfer to QROPS?

June 15, 2021

If you are considering UK SIPP or QROPS then this is a question for a pension specialist providing retirement planning advice for expats in Spain.

 

Are you currently living in Spain or planning on moving to Spain? One of the most important things you need to consider is whether your pensions have been structured tax efficiently in your new country of residence.

 

UK Pensions are exempted from your estate for UK IHT purposes. However, this only applies to deaths prior to age 75, after which, beneficiaries are liable to tax on pension drawdowns based on their marginal rate of tax. When you draw pension income from a UK Pension Scheme in Spain you are taxed at your marginal rate. UK Pensions are clearly not designed with a Spanish tax residency in mind.

 

A QROPS arrangement is more efficient for succession planning purposes. Pensions can be passed down to beneficiaries free of UK Inheritance Tax on death at any age. They may still be liable to Spanish Succession Tax but that largely depends on tax residency of beneficiaries and potentially (if the pension fund is not cashed and age dependant) be drawn tax efficiently by a tax resident beneficiary in Spain. Again, age dependent it’s also possible to draw your pension as a 5 year annuity and reduce the tax payable on pension drawdowns to circa 3%.

 

There are other advantages to consider such as escaping the lifetime allowance tax charge of 25% at best or 55% at worst. The ability to diversify out of Pound Sterling which makes sense if you are tax resident elsewhere to avoid Sterling currency fluctuations decimating your pension fund. It may assist a claim for non UK domicile status if your pension benefits are outside the UK.

 

You need to speak to a pensions expert who can provide retirement planning advice for British expats in Spain and is authorised by the UK Financial Conduct Authority (FCA) to give UK Pensions advice. It’s important they take the time to understand your personal situation in order to structure your pension arrangements in the most tax efficient manner. Speak to a Pensions specialist at Fiduciary Wealth. 

 

Give us a call on +44 207 998 0570 or e-mail enquiries@fwm.gi to book your free, no obligation consultation today!