How Can UK Expats Transfer a UK Pension to Spain?

While direct transfers into Spanish pension schemes are typically not permitted, alternative solutions—such as Qualifying Recognised Overseas Pension Schemes (QROPS) and international self-invested personal pensions (SIPPs)—offer compliant and flexible options for expats residing in Spain.

This guide explains how expats can transfer a UK pension to Spain, the key taxation rules for UK expats in Spain, and which pension strategies align with your long-term financial planning goals.

Spanish Pension System

The Spanish pension system is based on three pillars:

1. State pensions
2. Occupational pensions
3. Private pensions

State Pensions

Spain operates a robust state pension system funded through compulsory contributions of eligible working residents. There are two types of state pensions:

1. Contributory state pensions: The “standard” type, where both the eligible employee and the employer contribute to the pension plan.
2. Non-contributory state pensions: Basic, means-tested pensions available to Spanish residents with disabilities or those whose yearly income doesn’t allow sufficient contributions to the system.

Occupational Pensions

Occupational pensions are voluntary and typically offered by international businesses and larger companies. There are two types of occupational pensions:

1. Defined benefit pensions: These pensions are typically financed entirely by the employer.
2. Defined contribution pensions: DC schemes involve contributions from both the employee and the employer. Usually, the employer is responsible for the majority of the total cost (typically between 65% and 80%), and the employee covers the remainder.

Private Pensions

Individuals who seek supplementary means to support themselves in retirement often opt for private pension plans. They are voluntary and provide more flexibility in terms of the amount of contributions and withdrawals.

Note that tax-relievable contributions to Spanish private pension plans are generally capped at €1,500 annually. This limit may vary based on the type of pension arrangement and regional tax legislation.. You may contribute more, but you won’t be eligible for any tax relief on the excess amount.

Which UK Pensions Can Be Transferred Abroad?

The most popular pension schemes in the UK are:

Both types of pensions can be eligible for transfer, but there are exceptions. Unfunded public sector schemes (such as the NHS pension scheme or the teachers’ pension scheme) can’t be moved abroad.

Additionally, the UK State Pension can’t be transferred out of the UK, but you can receive payments from Spain.

Available Options for Transferring a UK Pension to Spain

UK expats have two potential options for transferring their pensions out of the UK while living in Spain:

1. Qualifying recognised overseas pension scheme (QROPS)
2. International self-invested personal pension (SIPP)

Qualifying Recognised Overseas Pension Scheme

A QROPS is an overseas pension scheme that accepts UK pension transfers and allows expats to benefit from favourable tax treatment, depending on the jurisdiction of the QROPS. His Majesty’s Revenue and Customs (HMRC) has established a list of recognised overseas pension schemes (ROPS) worldwide that meet strict requirements to receive transfers from the UK.

Spain currently has only one pension scheme on HMRC’s ROPS list—Itzarri EPSV de Empleo. However, this plan is only accessible to Basque public sector employees.

The ROPS list is updated twice a month, so it is possible that more Spanish pension schemes will become available in the future.

While QROPS continues to provide certain advantages, alternative pension solutions, such as international self-invested pension plans, have evolved to match—and even surpass—the benefits previously exclusive to QROPS.

For instance, the majority of QROPS permit the use of non-standard share classes, which often include 2–5% commissions payable to advisers. On the other hand, SIPPs only allow clean share classes, which exclude those commissions.

Can You Transfer Your Pension to a QROPS in Another Country?

Previous QROPS regulations permitted eligible UK expats to transfer their pensions to a QROPS in the European Economic Area (EEA) or Gibraltar and access the pension benefits in their country of residence without incurring tax charges or penalties. The main condition was that the pension holder needed to be a tax resident of the UK, an EEA country, or Gibraltar at the time of the transfer.

The QROPS regulatory framework was revised in October 2024. Under the updated rules, UK expats can move their pensions only to a QROPS in the country where they reside at the time of the transfer.

Not meeting this requirement would expose you to a 25% overseas transfer charge (OTC). The exemption applies only if your country of residence at the time of the transfer matches the jurisdiction of the QROPS.

International Self-Invested Personal Pension

International SIPPs are pension plans designed for UK expats who want to manage their pensions efficiently while retaining the UK regulatory protection. They are especially suitable for international workers who travel frequently, self-employed or freelance expats, and high-net-worth individuals who plan to retire abroad.

For UK expats, international SIPPs offer numerous advantages:

• A broader range of investment options, which may be more suitable for your retirement objectives
• More flexible withdrawal strategies, allowing you to draw only a portion of your pension while leaving the rest invested
• A possibility of pension consolidation, simplifying pension management and increasing investment efficiency
• International accessibility, particularly suitable for expats with short-term residency plans
• Increased tax efficiency, depending on the double tax agreements in place
• Reduced foreign exchange risks due to the possibility of investing and withdrawing your funds in multiple currencies

How Can UK Expats Contribute More Toward Retirement While Living in Spain?

UK expats may seek supplementary pension planning vehicles to save more for retirement while prioritising tax efficiency. A qualifying non-UK pension scheme (QNUPS) can be an effective tool for long-term retirement and estate planning as it offers the following advantages:

• No limit on contributions
• More investment freedom, allowing expats to invest in residential and commercial property as well as shares of private companies
• Efficient integration with other investment vehicles, such as trusts and life insurance policies

However, saving toward retirement in a QNUPS carries several potential drawbacks:

Taxation of Foreign Pensions in Spain

Spanish tax residents are subject to personal income tax on their worldwide assets, including pensions. The country’s tax system is progressive, and your tax rate is based on your total income and the region you’re located in.

For instance, income tax rates in Madrid range from 18% to 45%. In some regions, like Cataluña, income over €300,000 may be subject to a tax rate of 50%.

Depending on your current residency status, you may be liable for tax in the UK as well. To prevent their residents from paying taxes in both jurisdictions, Spain and the UK have signed a double taxation agreement (DTA), which states that pensions paid out to an individual who is a resident of a contracting state are subject to taxes only in that state. If you’re a Spanish tax resident, your private UK pension will only be taxed in Spain.

Spanish Wealth and Solidarity Taxes

Depending on your total asset value and the region you reside in, you may be liable for the Spanish wealth tax, and your pension will count toward your annual wealth tax calculation. Both Spanish residents and non-residents are required to pay the wealth tax, but the latter are taxed only on assets held in Spain.

Spanish residents can take advantage of certain deductions, such as a tax-free allowance of €700,000 and an additional €300,000 that you can claim against the value of your primary residence. If the total value of your assets exceeds €2 million, or if the net result remains positive after applying all deductions, you are required to submit a wealth tax declaration.

Additionally, Spanish tax residents with a net worth of over €3 million (after applying relevant deductions) and those living in regions with wealth tax exemptions are liable for Solidarity Tax for Great Fortunes. The tax rates range from 1.7% to 3.5%, and the highest rate applies to individuals whose total value of assets exceeds €10.696 million.