Pension?

My husband, daughter, son in law and grandson are moving to Spain this year.
My husband took early retirement and would be grateful for advice on whether it is better to have his pension paid directly into a Spanish bank account or into his existing English bank account and transferring the money.

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I would be grateful to hear views on this as well as I will be in the same boat next year.  I know it is easy to withdraw money from ATMs but are the bank charges worth it?   I will have two pensions, 1 currently being paid to a UK bank, and one which I will receive next year.  Plus, can the UK Old Age Pension (is it still called that or is it not PC enough?) be paid directly into a Spanish bank?

This is, of course, if I burn all my bridges and move lock, stock and barrel (any prizes on this site for mixing metaphors?) over to Spain.  I wouldn't be able to keep a house in UK and in Spain when I retire and, after experiencing bad things when I last rented out my house in UK (Cost me nearly £40,000 to get the place habitable again even with a property agent - including new windows because the old (nicer) wooden frames hadn't been painted in six years and hence rotted through) I don't want to go through all that again.  Plus, the way this government taxes people, the financial benefits would be negligible.

Any advice greatly appreciated.

 

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Hi to both of you the best people to answer your query are the pension providers but I doubt they will go to the hassle of trabsferring the money to Spain for you. For withdrawing cash from a UK account over here I would recommend opening a current account with Nationwide in the UK. At last investigation they appeared to have the best deal for cusotmers over exchange rate from the hole in the wall and I am sure it still not additional charges.

If it is likely to be a significant amount that you are going to be using in Spain every month. One assumes this to be the likely scenario if you are moving here. Then maintain your UK account and the pension going into it and then arrange a monthly transfer via a currency broker to your Spanish current account. The exchange rate will be significantly better than you will get from a UK high street bank.

Check the threads on Foreign Exchange and of you would like a recommendation please send me a Private Message and I will be more than happy to get someone to contact you to set up an account. Alternatively use one of the companies mentioned in the FX threads.

RGds

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Hi

 

I was advised that if a pension was from (local) government it would be tax free in Spain.

Is this correct and if so I assume the provider would have to remit directly to Spain - or would it be reclaimed from the Spansih Tax autorities if it was paid in the UK net of tax and then transferred?

Regards

 

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Hi Gus it depends on total income from all sources. If you are living here for 183 days of the year or more then your global income is subject to Spanish tax law. You qualify for certain allowances tax free but if your income (whether pension or otherwise) exceeds certain levels then you are subject to tax at the same rate as the Spanish. Your best bet is to talk to a Gestor so that you can explain fully what level of income you enjoy and then he/she can explain what you need to do about your La Renta.

The Spanish and the UK have a tax treaty but I THINK what you are required to do is receive the pension into a UK account (net) and then transfer to Spain. You will be subject to tax here but then you have to claim back tax paid in the UK. Or you have to make a declaration to the Inland Revenue that you are no longer resident in the UK so that your provider can pay your pension gross and then transfer here where you are liable for Spanish taxes if applicable.

Talk to the Inland Revenue and also to a Gestor here.

Rgds

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As far as banks go, Nationwide is the best bet. It charges nothing for ATM withdrawals in foreign currency and uses 'pure' exchange rates with no loadings. Nationwide also offers a credit card with no conversion fees or currency loading, but it does levy a charge for ATM withdrawals - so use the Nationwide debit card for cash.

According to Blevin Franks 'Living in Spain Guide', pensions can be paid gross unless they are derived from government service. You will need to complete an HMRC form for this: SPA/Individual from :

Centre for Non-Residents
PO Box 46
Fitz Roy House
Nottingham
NG2 1BD

Telephone 0115 974 1946
Fax 0115 974 2063

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As I am in (going to be) the same boat as you, I looked into the tax implications.

1.  You are not liable to tax on a public service (forces, civil service, fire etc) pension in Spain provided you receive the pension net and have paid tax in UK.

2.  If you transfer the money gross from UK to Spain you will be liable to Spanish taxes.  Do not do this as there is no lower limit on earnings in Spain.  See the thread about tax comparisons between UK and Spain and you will find you will pay more tax in Spain than in UK,

3.  The provider is under no obligation to remit directly to Spain.  This is because they would be liable to transfer fees and currency fluctuations.  It is your responsibility to arrange transfers.

4.  If you work in Spain, you do not have to declare any earnings in UK on which tax has already been paid.  Keep your annual P60 (provided by your pension provider) to prove you have paid UK tax on it.  Spain and UK have a reciprocal agreement which means you only pay tax in one country. (Unless Gordon can find a way round this, which I'm sure he's working on).

5.  Community fees paid in Spain are tax-deductable in UK provided you have no income in Spain.  Community taxes are not tax-deductable.  When filling in your tax return, enter the community fees in the expenses column and, if you are lucky enough to receive a pension in UK over the lower tax threshold, this should be deducted from your tax code meaning you pay less tax.

6.  Maintenance on rented property (which you let out) is not tax deductable as it is in UK unless you opt to pay taxes on income in UK.  Don't do this as tax on rental income is higher in UK than it is in Spain even if you get the maintenance reduction.

 

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Good Morning Bobaol

Thanks for the information in your post, I was unaware that Community fees were tax deductable in UK, as i have an RAF pension as my only income here in Spain it would make a considerable difference to the ammount I recieve. Could you possible point me in the direction of the legislation that covers this.

Many thanks

 

John

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This message was last edited by JeansSis on 5/19/2007.

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Sorry, I may have misled you there.  The only way you can claim community fees back is if you don't live there permanently.  On your tax return, under the foreign property section, enter the amount of community fees as an expense.  Your rental income becomes taxable if you do this. I get 3 points added to my tax code per year for this expense as I do not rent out my propery.  If you live there permanently, it is a necessary expenditure and is not tax deductable (I telephoned my local tax office about this and they confirmed it).   If your rental income is paid to a Spanish bank, you cannot claim the expense as you are paying tax on your income in Spain.  It is only if your rental income is paid to a UK bank, and hence you pay Gordon tax on that income, can you claim it as an expense.  Sorry if I got your hopes up.

My Forces pension is also added to my income in UK so I pay tax on that as well.  This means the 3 points I get is worth £120 per year off my tax as my pension pushes me into the 40% tax bracket. 

 

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Hello, I wonder if you could help me.  I read that you have a forces pension and are living in Spain.  I am due to retire from the forces in a couple of years. Is there anywhere I could get advice on where and how much tax I should be paying please?  I thought that I would pay full tax in the UK on it but as that will be my only earnings from there it shouldn't be that much.  Mr Brown I see has now increased the basic rate so is it better being taxed in Spain?

Thanks for your help.

Colin

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If you get a pension of 10.000 pounds in UK you will pay approx 1000 pounds in tax if you are on the basic rate with no tax credits, ie tax code 503.   This is automatically stopped by the Armed Forces Pensions Office in UK and you receive it net.

If you transfer it gross to Spain (say 15.000 euros) you will pay about 2300 euros in tax (say 1550 pounds).  This is taking into account the new tax rates for 2008 announced by Gordon Brown.

Of course, bank fees on ATM withdrawals, transfer costs etc have to be taken into account. 

 

 

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Back to banks. For sure, Nationwide are the only organisation that does not load a commission on to its exchange rates and I have their VISA credit card. (But beware establishments in Spain that try to bill you in sterling, whatever card you hold. They say they are doing you a favour, but it is a rip off).. However, if you have a Halifax account in the UK and open one with Banco Halifax Hispania, then transfers between the two accounts are at commercial rates and without a transfer fee.  Does anyone have any experience of how the Halifax commercial rates compare with the currency brokers? I have a feeling there will be little in it. I have had dealings with NatWest commercial and they matched Travelex and Currencies4Less every time. Actually, I find that unless you haggle, you do not get the best rate from the brokers.

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This message was last edited by JeansSis on 5/19/2007.

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Are there any retired Police Officers on this forum I need advice on transferring my pension to spain

Or is it easier to leave it in the uk where i shall pay uk tax on it

Im told that I cannot hold uk isa's if I dont pay uk tax but if i leave my pension in the uk I will be paying uk income tax so cant see where the problem lies just wondered if any retired police officers can give me some advice on the best action to take thanks

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Aren't the rules the same regardless of what you did before retirement ? Think there's been lots discussed previously on this subject. Look at Forces Pensions in Spain for example. Anything in there ?

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No there isnt thats why i put this post on my particular subject relates to isa's as well as my pension payments.

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Hi All,

I am afraid that reading through this thread creates confusion on the taxability of Government Pensions (GP). With very few exceptions these cannot be exported gross they are always taxed at source in UK by HMRC. GPs are Civil Service, Local Authority, Police, Teachers, some other public bodies that were part of the "public sector club"  before privatisation and Armed Forces. A strange anomaly is that NHS pensions can be exported gross. The two country exceptions that I am aware of are Cyprus and Australia.

State Retirement Pensions (SP) can be exported gross from UK to most countries in the world.

In both cases the payer will convert the pension to the currency of your choice and pay it into an overseas account that you nominate (since they buy so much you generally get a pretty good rate). The charge for this service for Teachers is £1 per transfer.

The next bit is more complicated and applies only to Spanish "tax residents" (more than 183 days in Spain). If you have a GP and nominate for it to be paid into your Spanish account it is taxed at source in UK but you get your full UK tax allowance set against this pension (£5435 for 2008/9) on any amount over that you pay tax at 20% until you have more than £41435 where the excess is taxed at 40%. This income is totally ignored by the Spanish taxman it does not exist that is the agreement between UK and Spain.

If you have an SP (basic SP is £4716 for 2008/9) then this can be converted at source, exported tax free from UK and payed into your nominated Spanish account. this would be about €5850 at todays exchange rate. You will then have to declare it and it is taxable in Spain. However you are entitled to the Spanish equivalent of the single persons allowance which at 65 benifits from age increases and earned income increases (pensions are treated as earned income in Spain). The Spanish allowance is more than the basic SP so you have no tax to pay in Spain.

The benefit here is that you have two personal allowances one in UK and one in Spain and as a result you do not pay any tax anywhere on you SP.

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This message was last edited by JohnKath on 4/18/2008.

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Thanks for that information John.

My neighbours may find it useful, will discuss it with them tomorrow when I arrive in Spain.

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