Spain continues to be the most popular destination in Europe for retiring British expats, with more than 300,000 currently residing in the country. And, although Brexit will undoubtedly have an impact on aspects of a Spanish retirement, it will by no means end it, as was purported by some of the anti-Brexit campaigning angles.
The Brexit vote has, however, significantly weakened the pound and caused big businesses to give consideration to their continued residence in Great Britain. An exit from Europe is mired in uncertainty, which is another factor in the nosediving value of the pound. But Brexit hasn’t happened yet, and so further negative impact on the currency and the British economy, once the reality of isolation from the common market takes hold, cannot be discounted.
British Government rules
QROPS are often the subject of government amendments to regulations, due in the most part to more than £8 billion leaving British shores for warmer horizons since their introduction 2006. The government, keen to stem the flow of capital leaving Britain, brought in a new ruling on pension transfers in the 2017 Budget.
It states that any overseas pension transfer into a fund located in a jurisdiction that differs to the that in which the pension holder resides, will be subject to a 25% tax charge. For Spanish residents, this could have been a potential issue, as Spain isn’t regarded as a financial or investment hub and the number of QROPS offered in the country rarely moves into double figures.
Gibraltar Vs Malta
Both Malta and Gibraltar are heavyweights in the investment world; both with favourable and flexible tax regimes, close ties to Britain, stable economic and political outlooks and plenty of reputable pension funds based within their respective jurisdictions.
For many, Gibraltar wins in the choice between the two; with a tax rate of just 2.5%, and a British banking system being among the top areas of appeal. Malta was previously marketed because of the number of Double Taxation Agreements (DTAs) it has in place with different nations, which many assume to be a green light for tax free withdrawal if your country of residence happens to be one of those that holds a Malta DTA. However, upon further review, a DTA seldom means tax-free withdrawal and a pension will more often than not actually be subject to taxation as it leaves Malta – and also as it enters the country of residence.
For clarity, tax benefits and investment freedom, the favoured jurisdiction for European residents is Gibraltar.
QROPS Gibraltar Benefits
For British pension holders currently residing or planning to retire in Spain, QROPS can provide stability, freedom, peace of mind and financial benefits which simply can’t exist in the UK in the run up to Brexit and beyond.
The most appealing of all the benefits for Spanish residents looking to draw a UK pension are the tax implications. For the majority, tax on pension income from the UK can range anywhere from 20% up to 45%, depending on the annual draw down amount. For UK retirees in Spain, the option exists to reduce this to 2.5% by transferring into a scheme run from Gibraltar.
Gibraltar also offers a 30% lump sum withdrawal upon transfer, flexible investment choices and flexibility of income choices when the comes time to draw the pension.
- Pensions pay out in USD, GBP, EUR and CHF.
- Avoid UK income tax
- Avoid UK dividends tax
- Avoid UK capital gains tax (CGT)
- Avoid 55% tax imposed upon death
- Higher annual returns and freedom of investment
- 100% cash lump sum to family upon death
- Strong regulatory structure
As with any financial product or solution, QROPS themselves, the rules, regulations, and the qualifying jurisdictions are liable to be amended without notice, and as such it is only recommended to initiate a QROPS transfer having sought advice from a qualified, knowledgeable financial advisor equipped with the latest information and insight.
Other Specific Country QROPS Information
Follow the links below to find out more about the specific country a QROPS is based in or being a resident in that country with a QROPS.