Retire to Spain and still get your UK pension « Euro Weekly News

Thinking of retiring to Spain with your UK pension? Here’s what you need to know in 2026.

You can still receive your UK State Pension in Spain, and it rises with UK inflation. But private pension transfers are more complex. As of late 2025, Spain has no HMRC-recognised QROPS, meaning most expats can’t transfer without paying a 25% Overseas Transfer Charge.

To qualify for exemption, your QROPS must be based in the same country you live in — a rule updated in October 2024. The tax-free transfer cap is now £1.073 million.

Alternatives like international SIPPs may suit some retirees. Plus, from April 2027, UK pensions may face inheritance tax unless you’ve been non-resident for over 10 years.

You can still top up your UK State Pension while living in Spain by paying voluntary National Insurance.

The rules have changed — get professional advice before moving your pension abroad.

How to transfer your UK pension to Spain: Rules, tax traps, and expert tips for a smooth retirement

So, you want to swap drizzle for pink daiquiris and retire in sunny Spain? You’re not alone. With around 300,000 Brits already soaking up the sun on Spanish soil, the Iberian coast has become the go-to spot for a golden retirement. But first, you’ll need to sort your finances — and fast.

Here’s what you need to know about shifting your UK pension to Spain — the dos, the don’ts, the tax traps, and the bureaucratic backflips.

First things first: What is a QROPS?

A Qualifying Recognised Overseas Pension Scheme (QROPS) lets Brits abroad move their pensions outside the UK. It’s the financial expat’s holy grail — but only if you do it right.

To avoid the 25% charge, your QROPS must now be based in the same country where you live, and that country must host a recognised QROPS. As of November 2025, Spain currently has no HMRC-recognised QROPS schemes, meaning most expats in Spain cannot use this option without triggering the Overseas Transfer Charge (OTC).

Pick a scheme not on HMRC’s approved list and you could face a stinging 25% tax penalty. For transfers over £150,000, QROPS are often considered — but they’re not the only option. You might also consider an international SIPP (Self-Invested Personal Pension), which remains under UK regulation and may offer lower fees.

Since 6 April 2024, a new Overseas Transfer Allowance (OTA) caps the amount you can transfer tax-free to £1,073,100. Go over that limit, and the 25% OTC applies to the excess.

Tax twists and traps

Spain and the UK have a Double Taxation Agreement (DTA), which means you won’t be taxed twice on your pension income. Apply for an NT (No Tax) code from HMRC so your UK pension is paid gross, and declare it on your Spanish tax return.

Important: The OTC exemption for transfers within the EEA was removed in October 2024. Now, both you and your QROPS must be in the same country to avoid the 25% tax.

Why go QROPS?

If QROPS becomes available in Spain again, the perks include:

• Receive your pension in euros — no more currency rollercoasters
• Invest globally and build a custom portfolio
• Pass on 100% of the value to heirs — unlike many UK defined benefit schemes

But watch for downsides:

• No UK Pension Protection Fund safety net
• Potentially higher fees
• Defined benefit schemes offer guaranteed income — lost if you transfer
• Move back to the UK within 10 years and you could trigger a tax hit

Yes, your UK State Pension is still paid to you in Spain, and it rises with UK inflation, thanks to post-Brexit agreements between the UK and EU.

Step-by-step: How to shift your pension to Spain

1. Check eligibility – Not all UK pensions can be transferred.
2. Choose a provider – Look for trusted names with fair fees and credentials.
3. Notify your pension provider – They’ll give you the necessary forms.
4. Submit everything – Ensure accuracy; one error can delay things.
5. Wait for HMRC approval – Then your funds can cross borders.

Topping up your UK pension from Spain

You can pay voluntary National Insurance contributions from abroad:

• Class 2: ~£182/year (if eligible)
• Class 3: ~£923/year

Each qualifying year adds about £324 to your annual State Pension.

And if you’ve worked in Spain too? The Withdrawal Agreement allows your UK and Spanish contributions to be combined for pension eligibility — though amounts are calculated separately under each system.

October 2024 and April 2027: The big changes

From October 30, 2024, you’ll only avoid the 25% Overseas Transfer Charge if your QROPS is in the same country you reside in — and that country has an approved scheme.

From April 6, 2027, unused UK pension funds may become subject to Inheritance Tax (IHT) unless you’ve been non-UK resident for at least 10 years. Overseas assets like QROPS may be IHT-exempt if you’re fully non-resident — but UK assets remain taxable.

Warning: Spain has its own inheritance tax laws. Always write a local will.

Is QROPS still worth it?

For those close to or over the £1.073m threshold, or planning to stay permanently abroad, QROPS can still make sense — if you tread carefully. But the landscape has changed.

Get it wrong? You could lose thousands.

Get it right? And you can retire with peace of mind

Useful links and sources:

Disclaimer: This article is for information only and does not constitute financial or tax advice. Always consult a qualified adviser.

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