Pensions advice in Spain: six tips for getting it right
Written by Canarian Weekly Business
WITH so many options for UK pensions, it can be difficult to know what to do. While any financial transaction brings a degree of risk, pensions are especially valuable, so making the wrong decision can be disastrous. This is an area where quality, expert advice is vital.
These tips can help you avoid costly mistakes and establish the right pensions approach for you.
Check your pension adviser is regulated by the UK Financial Conduct Authority (FCA)
Regulated financial companies must meet certain standards and act in the best interests of clients. While taking regulated advice is compulsory for people looking to transfer “final-salary” pension benefits worth £30,000+ a year, the FCA recommends it for anyone considering their pension options. A simple online search of a provider's full name plus “FCA” should link to their record in the Financial Services Register.
Consider all available options
Many expatriates transfer UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS), to unlock benefits such as currency and estate-planning flexibility. However, a QROPS will not suit everyone, and is not always the most tax-efficient solution. Pension funds can, potentially, be restructured in arrangements that provide better tax benefits for Spanish residents, so explore your options.
Don’t overlook cross-border tax issues
Spanish income-tax rates for pensions vary regionally between 19% and 48%. While UK-based pension advisers may have some understanding of Spanish taxation, they are unlikely to have the full expertise to navigate issues such as Spanish succession, wealth and income-tax mitigation, in the context of your overall situation. This can lead to a much higher tax bill than necessary, for you and your heirs.
A locally-based, UK-regulated adviser is best placed to establish the most tax-efficient approach for your particular circumstances and goals.
Beware of pension scams and unregulated investments
Be extremely cautious of advice from a company that has cold-called you, and never sign anything under pressure. Be especially wary of claims of unusually high or guaranteed returns, and opportunities to access pensions before the age of 55. Once you transfer, it is too late; you could lose some, or even all, of your funds, and face a large, UK tax bill, as well as penalty fees.
Also, note that many companies offering pension services are unregulated, offering unprotected investments that risk losing your money without compensation.
Research other people's experiences
Even amongst regulated providers, check for quality. Testimonials, particularly from people you trust, can indicate a provider is meeting the needs and expectations of their clients. Look for consumer reviews, ask around your local community, and follow up references, where possible. Be mindful, however, that other people's situations might be quite different from yours. What works for them, may not necessarily work for you.
Look at the whole picture
Pensions should form just part of your overall, financial plan. Your adviser should look at your pensions in the context of your unique circumstances, risk appetite and wider situation, including residency, your other assets, tax and estate planning, to help secure the best outcome for you and your family.
While you should take the time to get your pensions approach right, keep the Brexit countdown in mind. With many predicting that the UK could introduce tax penalties on overseas transfers, and limit how expatriates in the EU can access their UK pensions, post-Brexit, now is the time to review how to best secure a prosperous retirement in Spain.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices, which are subject to change. Tax information has been summarised; individuals should seek personalised advice.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com