Rules, Taxation, and Benefits of Transferring a UK Pension to a QROPS in Spain

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 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 appear on the HMRC list of Qualifying Recognised Overseas Pension Schemes (QROPS), updated on the 1st and 15th of each month. At the time of writing, the only Spanish scheme included on HMRC’s published QROPS list is Itzarri EPSV de Empleo. However, this scheme is restricted to employees of the Basque Government and is not accessible to retail UK expats.

Because access to that scheme is limited to eligible Basque Government employees, most UK expats cannot use a Spanish-based QROPS. In practice, most UK expatriates instead choose between:

1. Holding a UK-based international self-invested personal pension (SIPP)
2. Transferring to a QROPS in another jurisdiction (typically Malta or Gibraltar)

However, if you are resident in Spain, transferring to a QROPS in another jurisdiction will generally trigger the Overseas Transfer Charge unless one of HMRC’s statutory exemptions applies. For this reason, an overseas QROPS is often not the most suitable option for UK expats residing in Spain.

If the receiving scheme is not on the HMRC ROPS list at the time of transfer, the transfer is treated as an unauthorised payment. This leads to a 40% unauthorised payments charge on the transfer value, plus a 15% unauthorised payments surcharge if your total unauthorised payments in a 12-month surcharge period reach 25% or more of your rights under the scheme, taking your personal liability to 55%. The transferring UK scheme administrator may also be liable for a separate 40% scheme sanction charge.

Which UK Pensions Can You Transfer to a QROPS in Spain?

The UK schemes that allow transfers to QROPS are:

1. Defined benefit pensions: Also known as final salary pensions, which offer guaranteed retirement income.
2. 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?

To be eligible for a QROPS transfer, you typically need to be aged 18 to 75. UK non-residents and residents planning to leave the UK can both initiate transfers, but whether the 25% OTC applies depends on residency at the point of transfer. Emigration intent alone does not create an exemption.

Many advisers consider QROPS to become more cost-effective once pension values reach around £100,000–£250,000, although suitability depends on fees and individual circumstances. Below this level, a UK-based International SIPP is generally the more efficient option.

Under HMRC rules, the QROPS scheme manager must report any payments to HMRC for ten complete UK tax years following the transfer. Whether a payment from the QROPS attracts UK tax depends on two tests:

1. At least ten years must have passed since the day of transfer.
2. You must be a non-UK resident in the tax year of payment and in each of the previous ten tax years.

Payments that fall outside these conditions and within the UK member payment provisions may incur an unauthorised payment charge of 40% (plus a 15% surcharge if the 25%-of-fund threshold is met). However, routine post-NMPA pension income in line with UK rules is not automatically penalised.

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:

1. Overseas Transfer Charge (OTC).
2. Spanish income tax on QROPS withdrawals.
3. Spanish wealth tax and the Solidarity Tax on Large 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:

Wealth Tax

Spanish residents are liable for wealth tax (Impuesto sobre el Patrimonio) on their worldwide net assets. Depending on their legal characteristics, foreign pension arrangements (including some QROPS) may form part of the Spanish wealth tax base. Brexit removed the preferential treatment that previously applied to EU assets, so UK-derived assets are now treated like any other non-EU asset.

The national framework provides:

• A €700,000 personal allowance per individual
• An additional €300,000 exemption for the primary residence (residents only)
• Progressive rates from 0.2% to 3.5%, applied above the allowance
• A separate filing requirement if total gross assets exceed €2 million, even where no tax is due

Regional treatment varies materially. Madrid, Andalucía, Cantabria, Extremadura, and La Rioja apply a 100% bonification, meaning the regional wealth tax is reduced to zero. Catalonia and Extremadura apply a lower €500,000 personal allowance. Valencia raised its individual allowance to €1,000,000 from 2025. Catalonia maintains a top regional rate of 2.75%, while other regions follow the national 0.2%–3.5% scale.

Non-residents pay wealth tax only on Spanish-located assets and cannot claim the €300,000 primary residence allowance.

Solidarity Tax on Large Fortunes (ITSGF)

In addition to the regional wealth tax, the Solidarity Tax on Large Fortunes (ITSGF), which is now permanent, applies to net assets exceeding €3 million. The €700,000 personal allowance also applies to the ITSGF, so for residents, the effective floor is around €3.7 million, with rates as follows:

Crucially for HNW residents, the regional wealth tax paid is creditable against the ITSGF. This means residents of high-rate regions like Catalonia or Valencia typically owe little or no additional Solidarity Tax. On the other hand, residents of regions with 100% bonifications (Madrid, Andalucía, Cantabria, Extremadura, La Rioja) effectively pay the full ITSGF, which is the entire policy purpose of the tax. Non-residents are taxed only on Spanish-located assets.

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:

How To Move a UK Pension to a Spanish QROPS

To transfer your UK pension to a QROPS in Spain, take the following steps:

1. 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.
2. 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.
3. Contact your current pension provider: Inform your UK pension provider of your intention to transfer. They will supply the necessary transfer documentation.
4. 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). For many UK expats, an international SIPP may offer greater flexibility while keeping the pension within the UK regulatory framework. 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.

International SIPP vs QROPS for UK Expats in Spain: a Practical Comparison

Both QROPS and SIPPs offer distinct advantages, but they serve different retirement profiles. QROPS suit expats who are making a permanent move abroad and wish to hold their pension assets outside the UK regulatory framework, i.e., take advantage of the local tax treatment and the ability to receive income in their currency of residence.

International SIPPs, by contrast, keep your pension within a UK-regulated framework, typically at a lower annual cost and with the added security of Financial Conduct Authority (FCA) oversight.

Pension withdrawals continue to follow UK pension legislation, although the UK–Spain double taxation agreement generally allocates taxing rights over private pension income to Spain once you are Spanish tax resident.

Your decision between QROPS and a SIPP can be guided by factors such as the exposure to OTC, contribution and withdrawal flexibility, and your long-term residency plans: