Spain remains a top retirement destination for UK expats seeking a warmer climate and a favourable lifestyle. For those holding UK pensions, understanding a QROPS pension transfer and associated tax regulations is essential to preserving retirement income.
In this guide, we’ll introduce you to the rules and tax implications of transferring your UK pension to a QROPS in Spain. We’ll also outline the main benefits and provide steps for moving a pension to a Spanish QROPS.
What You Will Learn
- The key rules and eligibility requirements for transferring a UK pension to a QROPS in Spain.
- How Spanish tax authorities treat pension transfers and withdrawals from QROPS.
- The potential benefits of holding your pension in a Spanish QROPS as a UK expat.
- The steps involved in transferring your pension to a QROPS in Spain safely and efficiently.
What Are the Rules for Transferring a UK Pension to a QROPS pension in Spain?
To transfer a UK pension to Spain, the receiving scheme must be listed as a Qualifying Recognised Overseas Pension Scheme (QROPS) by His Majesty’s Revenue and Customs (HMRC). Currently, the only Spanish-based QROPS on the HMRC list is Itzarri EPSV de Empleo. However, the list is updated fortnightly, and additional Spanish schemes may be included in the future.
To qualify as a QROPS, a Spanish pension scheme must:
- Be regulated in its jurisdiction
- Be recognised for tax purposes in Spain
- Permit benefit withdrawals no earlier than age 55 (rising to 57 from 2028)
Transferring to a non-QROPS scheme which isn’t on the QROPS Spain list will trigger a 40% unauthorised payment charge, along with a potential 15% surcharge based on the transfer value.
Which UK Pensions Can You Transfer to a QROPS in Spain?
The UK schemes that allow transfers to QROPS are:
- Defined benefit pensions: Also known as final salary pensions, which offer guaranteed retirement income.
- Defined contribution pensions: Pension pots set up by you or your employer, where contributions are invested in assets like funds, shares, or bonds.
UK State Pensions and unfunded public sector pensions (e.g. the NHS and Teachers’ Pension Schemes) are not eligible for QROPS transfers.
Who Can Transfer a UK Pension to a QROPS in Spain?
You’re eligible for a pension transfer to a QROPS in Spain if:
- You’re between ages 18 and 75.
- You’re either a non-UK resident or a UK resident planning to leave the UK within the next 12 months.
A pension pot of £75,000 or more is generally recommended to justify the transfer and ongoing administration costs.
Following the transfer, QROPS providers are required to report all payments to HMRC for 10 years. To avoid UK tax charges of up to 55%, you must not return to the UK or withdraw funds during any part of this 10-year reporting period.
What Are the Tax Implications of Moving a UK Pension to a Spanish QROPS?
Transferring your UK pension to a QROPS in Spain can trigger several Spanish and UK tax obligations. These include:
- Overseas Transfer Charge (OTC).
- Spanish income tax on QROPS withdrawals.
- Spanish wealth tax and the Solidarity Tax for Great Fortunes.
Overseas Transfer Charge
The overseas transfer charge (OTC) is a 25% tax applied to certain UK pension transfers. Previously, UK residents transferring to a QROPS within the European Economic Area (EEA) were exempt.
However, under revised rules introduced on 30 October 2024, the exemption now only applies if:
- You are resident in the same country where the QROPS is located.
- And the transfer is made to a scheme in that same jurisdiction.
For example, if you are a tax resident in Spain and transfer to a Spanish-based QROPS, the OTC will not apply.
If your transfer exceeds the overseas transfer allowance – currently set at £1,073,100 – any amount above this threshold is subject to the 25% charge, even if the receiving scheme qualifies for OTC exemption.
Tax on QROPS Withdrawals
Once you become a tax resident in Spain, worldwide income, including QROPS withdrawals, is subject to Spanish income tax.
Although UK pension schemes allow a 25% tax-free lump sum, Spain does not recognise this exemption. To avoid taxation on this portion, it is advisable to take the lump sum prior to becoming a Spanish tax resident.
If you transfer your UK pension to a Spanish QROPS – and you’re a Spanish resident – Withdrawals from a Spanish QROPS are taxed at progressive income tax rates based on your autonomous community. For income exceeding €300,000, top marginal rates include:
| Region | Tax Percentage for Income Over €300,000 |
|---|---|
| Madrid | 45.9% |
| Murcia | 47% |
| Andalucía | 47% |
| Balearics | 49.75% |
| Cataluña | 50% |
| Canaries | 50.5% |
| Valenciana | 54% |
Wealth Tax
Spanish residents are liable for wealth tax on their worldwide assets, including foreign pension plans. Following the UK’s departure from the EU, UK pension schemes are now treated as non-EU assets, and the exemption no longer applies.
Your QROPS will be aggregated with other global assets to calculate your annual wealth tax liability.
- General allowances:
- €700,000 personal exemption.
- €300,000 additional exemption for Spanish residents on their primary residence.
- Regional variations:
- In Madrid, the tax-free threshold is higher, at €2,000,000.
- Rates:
- 0.2% to 3.5%, depending on asset value.
- Applies to assets exceeding €2 million (national baseline).
Solidarity Tax for Great Fortunes (ISGF)
In addition to wealth tax, high-net-worth individuals may be liable for the Solidarity Tax, which applies to net assets exceeding €3 million. Rates range from:
- 1.7% (for €3M–€5.3M).
- 2.1% (for €5.3M–€10.7M).
- 3.5% (above €10.7M).
Non-residents are only taxed on Spanish-based assets, while residents are assessed on worldwide wealth.
Transferring your UK pension to a Spanish QROPS without tailored advice could expose you to avoidable tax liabilities. Consulting a specialist adviser at Titan Wealth International ensures your transfer is structured efficiently, tax obligations are fully accounted for, and your retirement assets are optimally positioned.
What Are the Benefits of a Pension Transfer to a QROPS in Spain?
If you decide to transfer your UK pension to Spain, you can take advantage of a range of QROPS benefits designed to optimise retirement income, simplify pension management, and enhance estate planning. These include:
| Benefits | Explanation |
|---|---|
| Easier Pension Management | A Spanish-based QROPS allows you to manage your retirement assets locally, reducing cross-border complexity and improving visibility over investments and withdrawals. |
| Withdrawal Flexibility | From age 55 (57 from 2028), QROPS access mirrors UK drawdown rules, enabling tailored income planning through lump sums, phased withdrawals, or annuities. |
| Protection from Currency Fluctuations | Holding your pension in euros helps protect your retirement income from exchange rate volatility – particularly useful when covering local expenses. |
| No UK Inheritance Tax (IHT) | Historically, QROPS funds have fallen outside the scope of UK IHT. However, upcoming reforms to residency-based IHT rules in April 2027 may affect how pension assets are assessed. |
| Broader Investment Opportunities | QROPS provide access to a wider range of global investment options, supporting greater diversification and alignment with your financial goals. |
How To Move a UK Pension to a Spanish QROPS
To transfer your UK pension to a QROPS in Spain, take the following steps:
- Consult a Qualified Financial Adviser: Begin by speaking to a cross-border pension specialist. They will assess your objectives, review your existing pensions, and determine whether a QROPS – or an alternative structure – is appropriate for your situation.
- Select an Approved Spanish QROPS: Choose a pension scheme listed on HMRC’s official QROPS register. Currently, the only Spanish scheme currently approved is Itzarri EPSV de Empleo.
- Contact your current pension provider: Inform your UK pension provider of your intention to transfer. They will supply the necessary transfer documentation.
- Complete Form APSS263: Submit Form APSS263 with your personal and receiving scheme details to the UK scheme administrator to initiate the transfer.
Consider an International SIPP as an Alternative to Spanish QROPS
If the available Spanish QROPS does not align with your retirement strategy, consider an international self-invested personal pension (SIPP). These structures are often more flexible and can be tailored to suit expats who want broader investment access.
Benefits of an International SIPP include:
- Access to a wider range of global investment opportunities.
- Greater flexibility over contributions and withdrawals.
- Potential UK tax relief on contributions, if you have relevant UK earnings.
- Typically lower transfer and ongoing administration costs compared to QROPS.
- The ability to structure your portfolio to reduce currency exposure.
Key Takeaway
Transferring your UK pension to a QROPS in Spain can offer significant benefits, including simplified management, greater investment flexibility, and estate planning advantages, provided it aligns with your residency status and long-term goals.
Understanding the tax implications, such as the Overseas Transfer Charge, Spanish income tax, and wealth tax, is essential before proceeding.
This guide has outlined the key rules, eligibility criteria, and steps involved in a Spanish QROPS transfer, along with the potential benefits for UK expats.
Where a Spanish QROPS is not suitable, an international SIPP may offer a more flexible and cost-effective alternative – especially for expats seeking broader investment options.
At Titan Wealth International, our pension transfer specialists offer tailored QROPS and SIPP reviews to help you make informed decisions and optimise your retirement strategy.
