While any financial transaction brings a degree of risk, pensions are often the cornerstone of a comfortable retirement, so getting it wrong can be disastrous. Indeed, we are sometimes approached by people who have made the wrong pension choice with another firm and found it very costly to rectify.
These six tips can help you get it right first time:
1. Check your pension adviser is regulated by the UK Financial Conduct Authority (FCA)
Regulated companies must meet certain standards and act in the best interests of their clients. While taking regulated advice is compulsory for people looking to transfer ‘final-salary’ pension benefits worth £30,000+, it is strongly recommended for anyone considering their pension options. An online search of a provider’s full name plus ‘FCA’ should reveal more about their relationship with the regulator and link to their record in the Financial Services Register.
The UK Chancellor of the Exchequer, delivered his Autumn Statement on the 3rd December, which may affect expatriates living in Spain, depending on your circumstances. […] The UK Autumn Statement: How does it affect you?
2. Consider all your options
Many expatriates benefit from transferring UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS). Advantages include more flexibility with withdrawals, such as the option to take Euros or Pounds, and freedom to pass benefits to heirs other than your spouse. However, a QROPS will not suit everyone and is not always the most tax-efficient solution. With expert planning, pension funds can potentially be restructured in arrangements that provide additional tax benefits for Spanish residents, so take time to explore alternative options.
3. Get personalised, cross-border tax advice
The Spanish tax treatment of pensions differs to the UK and is highly complex. Under certain circumstances, for example, it may be possible to receive 92% of an annuity tax-free in Spain, but the rules are far from straightforward. Many pension advisers claim understanding of Spanish taxation, but may not have the full expertise to navigate issues such as Spanish succession, wealth and income tax mitigation in the context of your overall situation. This can lead to a much higher tax bill than necessary, for you and your heirs.
4. Beware of pension scams and offers that are ‘too good to be true’
Be extremely cautious of ‘advice’ from a company that has cold-called you, and never sign anything under pressure. Check the provider’s credentials, including their cross-border experience and understanding of Spanish taxation, to avoid the risk of tax penalties or even losing everything to fraud. Remember: with unregulated companies there is no recourse if things go wrong.
5. Research other peoples’ experience
Testimonials, particularly word-of-mouth recommendations from people you trust, can provide reassurance and indicate a business is doing things the right way. Look for consumer reviews, ask around your local community and follow up any references. Be mindful, however, that other peoples’ situations might be quite different to yours – what works for them may not necessarily work for you.
6. Look at the whole picture
Pensions should form just part of your overall financial plan. Your adviser should look at your pensions in the context of your unique circumstances and wider situation – including residency, your other assets, tax and estate planning – to establish the most suitable strategy for you and your family.
With some current opportunities not expected to survive post-Brexit, there may be limited time to take advantage of today’s freedoms. While you should not rush into any decisions, review your pension options without delay to make sure you are in the best position to enjoy your retirement in Spain.
Spanish tax authority has published a list of Q&As regarding asset reporting obligations that ABC Mallorca readers will find very useful, here are some paraphrases of various key points. […] Asset Reporting Obligations – Q&As
More about Blevins Franks tax advisors
For more information and personalised advice, contact Blevins Franks on +34 971 719 181.
To keep in touch with the latest developments in the offshore world, check out the latest news on Blevins Franks Tax & Wealth Management Specialists.
Related articles to tax for foreigners living in Spain.
Blevins Franks Mallorca specialises in giving advice for tax-driven, wealth management investments. […] Blevins Franks Tax & Wealth Management Specialists
This article was written on June 1st, 2018.