UK Pension in Spain: How to Access Your Pension as an Expat

Your UK State Pension: Still Paid Abroad

The good news is that moving to Spain does not stop your UK state pension. HM Revenue & Customs will continue to pay your state pension to you wherever you live in the world. You have three options for receiving it:

• Paid into a UK bank account: This is the simplest option. Your pension arrives in sterling, and you transfer it to Spain when you need it. This gives you control over when you convert currency.
• Paid into a Spanish bank account: HMRC can pay directly into your Spanish account. The payment will be converted to euros at the prevailing exchange rate on the day it arrives. You lose control over the timing of the conversion.
• Paid by cheque: Rarely used now, but still technically available. Cheques are slow and expensive to cash in Spain.

To set up or change how your state pension is paid abroad, contact the International Pension Centre on +44 191 218 7777 or fill in form BR1 online at gov.uk.

The Triple Lock: Does It Apply Abroad?

Yes. Because Spain is within the European Economic Area, your UK state pension continues to increase each year under the triple lock guarantee. This means your pension rises by the highest of: inflation (CPI), average earnings growth, or 2.5%.

This is a significant advantage. UK pensioners living in countries outside the EEA — such as Australia, Canada, or South Africa — have their pension frozen at the rate it was when they left the UK. A pensioner in Australia who left in 2010 could be receiving hundreds of pounds less per month than someone in Spain with the same contribution record.

For the 2025/26 tax year, the full new state pension is £230.25 per week (approximately €270 at current rates). Over a year, that is roughly €14,000 — a meaningful income in Spain, particularly in lower-cost areas like Andalusia or Murcia.

QROPS: Transferring Your UK Pension to an Overseas Scheme

A Qualifying Recognised Overseas Pension Scheme (QROPS) is a pension scheme established outside the UK that meets HMRC requirements. Transferring your UK private or workplace pension into a QROPS was historically popular with expats, but the landscape has changed significantly.

How QROPS Work

You transfer your UK pension fund to an approved overseas pension scheme — typically based in Malta, Gibraltar, or the Isle of Man. Once transferred, the pension is managed under the rules of that jurisdiction rather than UK rules.

Potential Advantages of QROPS

• Avoid the UK Lifetime Allowance issues: Although the UK Lifetime Allowance was abolished in April 2024, there have been discussions about its reintroduction. A QROPS puts your pension outside UK control.
• Currency flexibility: Many QROPS allow you to hold your pension in euros, eliminating ongoing currency risk.
• Potentially favourable tax treatment: Depending on the jurisdiction, you may pay less tax on drawdowns.
• Inheritance benefits: QROPS may allow you to pass on your pension fund more flexibly to beneficiaries.

Significant Drawbacks

• 25% Overseas Transfer Charge: HMRC levies a 25% tax charge on transfers to QROPS unless both you and the QROPS are within the EEA, or the QROPS is in the same country where you are resident. For UK-to-Malta transfers where you live in Spain, this charge applies. For UK-to-Spain QROPS (if available), it would not.
• High fees: QROPS providers typically charge 1-2% annually in management fees, plus initial setup fees of £1,000-£3,000. Over 20 years, these fees can significantly erode your fund.
• Loss of UK protections: You lose access to the UK Financial Services Compensation Scheme (FSCS) and the Pension Ombudsman.
• Complexity: QROPS transfers are complex and require specialist financial advice. Poor advice in this area has led to significant losses for some expats.

Our advice: For most UK expats in Spain, a QROPS transfer is not worthwhile in 2026. The fees are high, the Overseas Transfer Charge is punitive, and the advantages are limited now that the Lifetime Allowance has been removed. Only consider a QROPS if you have a very large pension fund (over £500,000) and have received advice from a qualified, FCA-regulated adviser who specialises in cross-border pensions.

SIPPs: Keeping Your Pension in the UK

A Self-Invested Personal Pension (SIPP) is often a better option for UK expats in Spain. You keep your pension in the UK, under UK regulation, but consolidate your various workplace and personal pensions into a single, flexible SIPP.

Advantages of a SIPP for Expats

• No transfer charge: Because the pension stays in the UK, there is no 25% Overseas Transfer Charge.
• Full UK regulatory protection: Your SIPP is covered by the FSCS and regulated by the FCA.
• Flexible drawdown: You can draw income as and when you need it, in whatever amounts suit you. This is crucial for tax planning in Spain.
• Wide investment choice: SIPPs allow you to invest in funds, shares, bonds, and other assets — often with lower ongoing fees than QROPS.
• 25% tax-free lump sum: You can still take 25% of your pension as a tax-free lump sum (called the Pension Commencement Lump Sum), although note that in Spain this lump sum is taxable as income.

Important Tax Note

When you draw from your SIPP while living in Spain as a tax resident, your pension income is taxable in Spain, not the UK. Under the UK-Spain Double Taxation Agreement, pension income (other than government pensions) is taxed only in the country of residence. This means:

• You report your SIPP drawdowns on your Spanish tax return (Declaración de la Renta)
• Spanish income tax rates apply (19%-47% depending on the amount)
• No UK tax is deducted — you should submit form DT-Individual to HMRC to ensure pension payments are made gross

Drawing from UK Private Pensions While in Spain

Whether your pension is a defined benefit (final salary) scheme, a defined contribution scheme, or a SIPP, the mechanics of drawing income while living in Spain are broadly similar:

Step 1: Inform Your Pension Provider

Tell your pension provider that you are now resident in Spain. They will need your Spanish address and may ask for your NIE (Número de Identidad de Extranjero) and Spanish tax identification number.

Step 2: Apply for Gross Payment

By default, UK pension providers deduct UK income tax under PAYE before paying you. As a Spanish tax resident, you should not be paying UK tax on your pension (with the exception of government pensions — see below). Submit HMRC form DT-Individual (also called the Double Taxation Treaty claim form) to request that your pension is paid without UK tax deduction.

Processing this form can take 3-6 months, so apply early. In the meantime, any UK tax deducted can be reclaimed through your UK Self Assessment tax return.

Step 3: Declare in Spain

All pension income must be declared on your Spanish annual tax return. Spanish income tax is progressive:

• First €12,450: 19%
• €12,451 to €20,200: 24%
• €20,201 to €35,200: 30%
• €35,201 to €60,000: 37%
• €60,001 to €300,000: 45%
• Over €300,000: 47%

Government Pensions: The Exception

If you receive a UK government pension — such as a civil service pension, Armed Forces pension, NHS pension, or teacher's pension — the tax treatment is different. Under Article 18 of the UK-Spain Double Taxation Agreement, government service pensions are taxable only in the UK. You will continue to pay UK tax on these pensions, and they are exempt from Spanish tax (although Spain may use them to determine the rate applied to your other income).

Tax Implications Under the Double Taxation Agreement

The UK-Spain Double Taxation Agreement (DTA) is the key document governing how your pension is taxed. The main rules are:

• Private pensions (including SIPPs and workplace pensions): Taxed only in Spain if you are Spanish tax resident
• Government service pensions: Taxed only in the UK (unless you are a Spanish national)
• State pension: Taxed only in Spain if you are Spanish tax resident
• Lump sums: The 25% tax-free lump sum from a UK pension is not tax-free in Spain. Spain will tax it as income in the year you receive it. Consider spreading withdrawals over multiple tax years to manage the tax bill.

It is essential to get professional tax advice before drawing any large pension amounts. A qualified asesor fiscal (tax adviser) in Spain who understands UK pensions can save you thousands.

Currency Risk on Pension Payments

If your pension is paid in sterling but your living costs are in euros, you are exposed to currency risk. The GBP/EUR exchange rate has fluctuated between 1.05 and 1.20 over the past five years. On a pension of £20,000 per year, that is the difference between receiving €21,000 and €24,000 — a swing of €3,000.

Ways to Manage Currency Risk

• Currency transfer specialists: Companies like Wise (formerly TransferWise), Currencies Direct, and OFX offer much better exchange rates than high street banks. Savings of 1-3% on each transfer are typical, which on a £20,000 annual pension could save you €200-€600 per year.
• Regular payment plans: Some currency brokers offer regular monthly transfers at a fixed rate, locking in an exchange rate for 6-12 months. This gives you certainty about your euro income.
• Forward contracts: For larger amounts (such as a pension lump sum), you can fix the exchange rate up to two years in advance. This is useful if you are planning a large withdrawal and want to protect against a rate drop.
• Batch transfers: Rather than transferring monthly, some expats accumulate several months of pension in the UK and transfer when the rate is favourable. This requires having enough euro savings to cover short-term expenses.

Tip: Never use your UK bank to send money to Spain. High street banks typically charge a transfer fee (£15-£30) plus a markup on the exchange rate of 3-4%. A specialist broker will charge no fee and offer a markup of just 0.3-0.5%.

The S1 Form: Healthcare Coverage

If you are receiving a UK state pension and are registered as a resident in Spain, you are entitled to an S1 form (formerly E121). This entitles you to state healthcare in Spain, paid for by the UK government.

How to Get an S1

• Contact the Overseas Healthcare Services team at NHS Business Services Authority
• They will issue your S1 form, which you register at your local INSS (Instituto Nacional de la Seguridad Social) office in Spain
• Once registered, you receive a Spanish health card (tarjeta sanitaria) and can access the Spanish public health system

Who Qualifies

• UK state pensioners living in Spain
• People receiving certain UK disability benefits
• Dependants of the above (spouse/partner and children under 26)

The S1 is enormously valuable. Private health insurance in Spain for a person over 65 can cost €200-€400 per month. The S1 gives you equivalent or better coverage at no cost.

However, the S1 does not cover you if you are not yet of state pension age. If you move to Spain before reaching pension age, you will need private health insurance until you qualify for the S1, or until you have been working and contributing to the Spanish social security system for a sufficient period.

Practical Steps: A Checklist

• Before you move: Get a UK pension forecast from gov.uk to understand your full entitlement. Consider consolidating multiple small pension pots into a SIPP.
• On arrival: Register as a resident (empadronamiento) and obtain your TIE card. Notify all pension providers of your new address.
• Within 3 months: Submit HMRC form DT-Individual for each pension to stop UK tax deductions. Set up a currency transfer account with a specialist broker.
• Apply for S1: Contact the Overseas Healthcare Services team and register the S1 at your local INSS office.
• Find a tax adviser: Engage a Spanish asesor fiscal with experience in UK pensions. File your first Spanish tax return by 30 June for the previous calendar year.
• Annual review: Check that you are not overpaying tax in either country. Review your currency transfer arrangements. Consider whether your drawdown strategy is tax-efficient.

Accessing your UK pension in Spain is entirely manageable, but it requires planning and professional advice. The tax savings from getting this right — or the cost of getting it wrong — can easily run into thousands of euros per year.