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Pensions in Spain

Pensions in Spain If you are reading this, you may well be considering moving to Spain, are currently in the throes of arranging your move or are already there. Part of the moving process is considering all the areas of your life which will be impacted and what you might need to do to minimise or alleviate that impact.

Retirees living in Spain who are in receipt of a UK State Pension can opt to have their monthly payments paid into their bank or building society account in the UK or their bank account in Spain. For the second option, you’ll need the international bank account number (IBAN) and bank identification code (BIC) numbers for your Spanish account.

But remember, having your pension paid directly into your Spanish euro account means you will have no control over the exchange rate used for the transfer. Many expats prefer to have their pension paid into their UK account in Sterling, and then use a currency transfer specialist to send euros to their Spanish account.

Exchange rates offered by currency specialists are better than those you would receive if your pension was sent direct to Spain through a UK bank, as would be the case if the Government sent it direct for you. Currency specialists also allow you to fix an exchange rate for future transfers.

As well as your State Pension, you may have one or more personal or workplace pension plans in place. If this applies to you, it is highly advisable to talk through these with a financial advisor before leaving the UK. They will look at your various pension funds and investments as a whole and offer various tax efficient options for structuring all your assets and funds.

VIEW OUR INTERACTIVE BUYING GUIDE TO SPAIN

FAQs: Pensions in Spain

Do I pay tax on my UK pension if I live in Spain?

Yes, UK pensions are generally taxable in Spain if you become a Spanish tax resident (meaning you live there more than 183 days per year). Under the UK-Spain double tax treaty:

  • - State pensions are usually taxable only in Spain
  • - Private and workplace pensions are also taxed in Spain

You must declare them on your Spanish tax return. Tax rates depend on your total worldwide income and apply progressively.

Can I access my UK pension from Spain?

Yes, you can access UK pensions from Spain. You can:

  • - Continue receiving your UK State Pension directly to a UK or Spanish bank account
  • - Access private or workplace pensions via drawdown or annuity, depending on your provider

You’ll need to inform HMRC and update your address. Currency fluctuations may impact your income if you’re paid in pounds but living in euros.

How is my UK State Pension affected if I move to Spain?

You can still claim your UK State Pension while living in Spain. It will be:

  • - Paid in full, just like in the UK
  • - Uprated annually under current rules (as Spain is covered by the Withdrawal Agreement)

You must notify the UK government when you move and provide a bank account for payments. Check your entitlement at gov.uk before relocating.

Do I need to declare my UK pension in Spain?

Yes. If you are tax resident in Spain, you must declare all worldwide income - including pensions - even if they are taxed in the UK or paid into UK bank accounts. Failing to declare overseas income can lead to fines and backdated tax liabilities.

Is Spain a good place to retire from a tax perspective?

Spain offers several retirement-friendly regions and can be tax-efficient with proper planning. Some retirees benefit from lower income tax bands and access to public healthcare. However, pension taxation, wealth tax, and reporting obligations (like Modelo 720 for foreign assets) mean advice from a bilingual tax expert is crucial.