Forces Pensions in Spain

Is anyone out there in receipt of a Forces pension paid into a bank in Spain?

I have been told that these types of pensions are not liable for tax in Spain.  However, I am also told you still have to continue paying tax in UK even if you are resident overseas but you can have the OAP and private pensions paid in Spain free of UK tax which means you have to pay tax on them in Spain.

I would be grateful for anyone in this situation to give some advice on this as I currently pay some £3,000 a year tax in UK on my Army pension which, with the pound crashing against the euro, would make quite a difference. 

Hi bobao,

Forces Pensions are in a catagory called Governmant Pensions (civil service, teachers, police etc) and are always taxed in UK before payment except if you become a tax resident of Cyprus and a few other places.

You can export your State Pension tax free to most countries and in both cases the government in uk will pay in local currency into your overseas bank account.

Here is the good bit if you are in Spain more than 183 days you are automatically tax resident in Spain and you get the full Spanish earned income alowance to set against your state pension.and depending on your age (65 is retirement age in Spain where you get extra allowances) it willbe about the same as your state pension so you will pay no tax on that.

Meanwhile back in UK you will get your full annual allowances to set against your government pension so your tax on that will be reduced if you are already in receipt of your state pension.

regards, John.

Sorry folks I got this all wrong so have edited it!

If you have started your armed forces pension after 1986 and are NOT in drawdown, you can move to a QROPS in Malta which avoids the 55% tax upon death whilst drawing benefits that the UK charges. You can also transfer your pension into EUROS, have freedom of fund choice and pay Spanish rather than UK income tax. QROPS Specialists know more.

Free promotion again Richardbkk!!!

There are some new changes which took place yesterday. PM me if you want advice. I'm here to help. Forums are places where people help each other and share ideas. This is a specialist area.

 Richardbkk

I assume that the changes that you mentioned won't be applied retrospectively?

John receives an Army pension and a civil service pension. His Army pension is taxed in the UK but paid into his Spanish bank account.  His civil service is taxed (not a lot) and paid into his UK bank account.  He doesn't have to declare them to the Spanish tax authorities though he completes a tax declaration here as we are both officially tax residents.  His state pension is paid into his Spanish bank account but he doesn't have to pay tax on it as it is below his allowances.

I receive a civil service pension that is paid into my bank account in the UK.  As this pension is less than the tax allowances, it isn't taxed.  As well as the state pension I receive two private pensions (one of which is very small and not index-linked!) and these are now paid tax-free, but declared on my Spanish tax form.  I have to pay tax here in Spain, though it is less than I paid in the UK.  I am currently trying to get HMRC to refund me the tax paid over the last couple of years!!!

Sue

I get a UK Gov pension (ignored in Spain) 

If I lived in UK I would pay about  £1,500 tax on my OAP as it would be added to the Gov Pension;     I pay nothing in Spain !!!! 

So If you get a government pension and it is taxed in UK ( presumably? ) and you are resident in Spain so just declare your OAP and therefore pay no tax on that?

Is that right?...does it work out that you are paying the same amount of tax?

My Hubby has a pension ( not government ) which is taxed in Spain ( although the UK company will not pay the pension direct to Spain ) so he is taxed on that and his and mine OAP here in Spain.

We have friends who do not pay tax on their UK private pension anywhere ( even tho it is a good amount ) and only have to declare their OAP.

I suppose all I want to know is is this fair and right? Seems a bit iffy if you can not pay on a forces/teachers pension but have to pay on others.

Hi Sue,

No, you are correct the changes won't be applied retrospectively. Anyone who moved into a QROPS before will be subject to the old rules. The QROPS they hold will be delisted, but they won't face an unauthorized tax charge. Armed forced pensions can only be transferred to a QROPS if they are not in drawdown and they started the pension after 1986.

Best regards,

Richard

Hi Karen,

If you have a private pension in the UK, you can transfer to Malta which has a DTA with Spain. The you just pay the Spanish income tax upondrawdown. This can be paid directly into your Spanish bank account and it can be set up in EUROS or GBP. Your choice.

This will then avoid all UK taxes and Maltese taxes. So, no 55% tax upon death. So, if anything happens to your husband, the whole lot gets passed on to you. The only tax you pay is the Spanish income tax when you draw benefits.

QROPS does not suit everyone. Sometimes it is better off left in the UK. It depends on where you intened to retire, the amount, the type of pension and other factors.

Best regards,

Richard