Transferring a UK pension to Spain (SIPP and QROPS)

Key rules

• UK transfer charge: A transfer to a QROPS can face a 25% UK charge unless an exclusion applies.
• Spanish status: Spain does not recognise QROPS or SIPP as special statuses, so they bring no Spanish tax benefit.
• Scheme-to-scheme transfer: A transfer that goes directly between foreign schemes is generally not taxed in Spain, but cash paid to you is.
• Lump sum: The UK tax-free 25% lump sum is generally taxable in Spain.

Is a transfer worth it?

For most people moving to Spain, leaving the UK pension where it is is the simplest choice. A transfer only makes sense if it clears three tests: the UK transfer charge, how Spain sees the receiving scheme, and Spanish tax on the move. The decision below helps you compare keeping, transferring and cashing in.

What the UK charges you

The UK applies a 25% overseas transfer charge to transfers to a QROPS, unless an exclusion applies. This has been the case since 30 October 2017. The main exclusions are:

• You and the QROPS are in the same country.
• You are resident in the EEA and the QROPS is in the EEA. Spain is in the EEA.
• The QROPS is an occupational scheme sponsored by your employer.
• The scheme is a public service or international organisation scheme.

The EEA exclusion became stricter on 6 April 2024. Whether you are resident in Spain at the moment of transfer matters, so time the transfer with care. A five-year reporting period applies after a transfer. The UK also removed the lifetime allowance in April 2024 and replaced it with a lump sum allowance and a death benefit allowance.

Get advice from a UK-regulated adviser or HMRC before you move any money. A 25% charge on a large pot is expensive.

How Spain sees QROPS and SIPP

Spain has no QROPS regime. QROPS and SIPP are UK labels, and Spain gives them no special status. It treats your UK pension as a foreign pension scheme.

This means a QROPS brings you no Spanish tax advantage. What you take out is taxed in Spain as work income (rendimientos del trabajo), added to your other income at progressive rates. The UK-Spain tax treaty generally gives Spain, as your country of residence, the right to tax private pensions.

Spanish tax on the transfer itself

A transfer straight from one foreign scheme to another is generally not taxed in Spain, as long as the money goes scheme to scheme and never reaches you. If cash is paid to you, it is taxed as income.

Foreign funds can enter a Spanish pension plan only in limited cases, typically from schemes that count as equivalent under EU law. Contributions into a Spanish plan may also be subject to annual limits. Ask a Spanish tax adviser before you try this.

Lump sums

The tax-free 25% lump sum under UK rules is generally taxable in Spain. Some taxpayers argue for a 40% reduction on lump-sum capital payments from pensions where the right was built up before 2007. This applies only in limited cases, and the treatment is contested. Do not plan around the reduction without written advice from a Spanish tax adviser.

What to do

1. Check the UK charge and exclusions with a UK-regulated adviser or HMRC.
2. Ask a Spanish tax adviser how withdrawals and any lump sum would be taxed for you.
3. Compare the result with simply keeping the pension where it is.

The FAQ below answers common questions about Spanish recognition and the UK charge.

Keep, transfer or cash in your foreign pension

Should you keep your UK pension where it is, transfer it, or cash it in?

• Keep it where it is: Your pension is already growing well, you have not yet become Spanish resident, or you want to avoid a one-off tax bill. Withdrawals are taxed in Spain as work income once you live here, so you can plan how much to take each year.

• Transfer it to another pension scheme: You have a clear reason, such as simpler management or currency. Check first that the receiving scheme is a recognised pension wrapper, and ask a tax adviser how Spain will treat it. Transfer before you become resident if you can, as timing relative to residency affects the tax.

• Cash it in: You need the money and accept the tax. A lump sum is taxed in full in the year you receive it, and the UK 25% tax-free lump sum is not exempt in Spain. Cashing in while you are resident can push you into a high rate.

Start with Spanish tax: pensions are taxed as work income at progressive rates, so large single withdrawals cost more than steady ones. Then check that any new scheme is recognised as a pension wrapper. Then look at timing: act before you become Spanish resident or spread withdrawals over several years.

Check the tax effect of your specific scheme and timing with a Spanish tax adviser before moving or withdrawing money.

Frequently asked questions

Does Spain recognise QROPS or SIPP status?

No, Spain does not recognise QROPS or SIPP as special statuses. Both are UK concepts, and Spain treats your UK pension as a foreign pension scheme. Payments to you are taxed as work income.

Is moving my pension between foreign schemes taxed in Spain?

Generally no, if the money moves directly between the schemes and never reaches you.

When does the UK 25% overseas transfer charge apply?

The UK charges 25% on transfers to a QROPS made since 30 October 2017, unless an exclusion applies. Exclusions include you and the QROPS being in the same country, or both being in the EEA, and the rules were tightened from 6 April 2024. Check where you are resident at the time of transfer, because a five-year reporting period follows the transfer.