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Musings from Mallorca. Some on Financial Advice. Some on how to legitimately reduce your Spanish tax bill. Plus some Life Stories from our fabulous Island.

UK State Pension in Spain
27 April 2016 @ 19:14

UK State Pension Payments into Spanish Account

UK State Pension Payments into Spanish Account

A relatively little known fact is that, UK pensions paid directly into a Spanish bank account cannot, legally, be charged any form of commission or other charges, also Government / State Pensions are converted at Government set exchange rates which are set monthly. For May 2016 this rate is 1.2708 and here is a link to the rates page.

https://www.gov.uk/government/publications/hmrc-exchange-rates-for-2016-monthly Make sure to look up the Euro rate under Eurozone as you will not find EU countries listed seperately.

If the pension is paid into a UK bank account and then transferred then the normal charges apply, which will be more costly than a direct transfer to a Spanish account.

In addition to the State Pension, Occupational pensions can usually be paid directly into a Spanish account but some pension providers make a small charge usually around £3 or so. Exchange rates will vary but are generally at wholesale rates.

The UK State Pension is always taxable in Spain under the terms of the double taxation treaty. Be careful here because if you don't apply to have it paid gross in the UK you could end up paying tax to both the UK and the Spanish taxman, with the ensuing nightmare of trying to get it back from the UK tax office. Below is the link to the tax form UK/Spain (SI 1976 number 1919) (Form Spain-Individual) from HMRC.

http://www.hmrc.gov.uk/cnr/spain-individual.pdf

Alternative Methods

You could also arrange for a currency broker to convert the money from your UK account before the transfer to your Spanish account. This is often cheaper than paying bank fees. 

By using a foreign exchange specialist it is possible to agree a fixed exchange rate, with rates set up to a year in advance. This may help avoid sudden fluctuations in your spending power.

Another way of avoiding transfer charges would be to establish an International Account with sterling and euro accounts in the same bank. You should then have no charges for pound to euro transfer.



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