UK Pension: Do You Need to Move It Before Getting a Spain Non Lucrative Visa?

Question

Can those who had UK pensions tell me if it was made compulsory to move those pensions to an international SIPP before or after getting their Spain Non Lucrative Visa?

Answers

These are the answers of Spainguru’s Facebook group members:

“I read that moving a UK pension to an international SIPP helps avoid Spanish wealth tax.”

“UK pension funds (SIPPs, workplace pensions, etc.) are included in Spanish wealth tax calculations because they are not exempt.”

“All worldwide assets need to be declared for Spanish wealth tax. The issue is whether capital growth in the pension is subject to capital gains tax each year. Best to speak to a tax professional or estate planning professional.”

“If you take your pension out of the UK, you must pay a 25% tax charge.”

“Only EU pensions are exempt from Spanish wealth tax. Spain views invested pensions as ‘investments,’ meaning they are taxed as such, regardless of location.”

“There is no compulsion to move your pension to another country, like Malta. But if you transfer it abroad, a 25% overseas transfer charge applies.”

Read Spainguru’s “Financial Planning for Expats in Spain: Common Questions Answered“

“Some people move to ‘international SIPPs’ to have an EU-based financial advisor. However, these are still UK pensions, just with providers that cater to expats.”

“If you have significant UK assets and a large pension, after 2027, it will be subject to inheritance tax (IHT) in the UK. A 25% transfer charge now could save 40% in tax later.”

“Some tax advisors suggest moving pensions before leaving the UK. However, UK financial advisors may not fully understand how Spanish taxation works.”

“There is no such thing as an ‘international SIPP’—it’s just a UK pension rebranded for expats. Some tax professionals say leaving it in the UK is fine, while others suggest moving it. Research is key.”

“It’s best to consult a Spanish tax advisor in your region to see how they would classify and tax your UK pension.”

Conclusion

From the experiences shared by community members, there is no legal requirement to move a UK pension to an international SIPP before or after obtaining a Spain Non Lucrative Visa. However, there are key considerations to keep in mind:

1. Spanish Wealth Tax – UK pensions may be included in Spain’s worldwide wealth tax calculation since they are not exempt.
2. Capital Gains Tax (CGT) – Some professionals suggest that capital growth within a pension may be taxed annually as investment income in Spain.
3. 25% Overseas Transfer Charge – If you transfer your pension out of the UK, you may face a 25% tax penalty unless it goes into a qualifying scheme in an approved jurisdiction.
4. Inheritance Tax (IHT) After 2027 – UK pensions may be subject to IHT in the UK if a person dies with large assets. Some advisors suggest that paying 25% now could save 40% later.
5. Financial Advisors and Hidden Fees – Many expats report hidden charges and long lock-in periods from financial advisors pushing international pension transfers.
6. Finding the Right Tax Advisor – Tax rules vary by region in Spain, so speaking to a local Spanish tax professional is recommended to understand how your SIPP or UK pension would be taxed in your location.

While some people choose to move their pension for financial planning reasons, there is no requirement to do so for the NLV. Each case is different, so it’s important to seek tax advice before making a decision.

What is an International SIPP

An International SIPP (Self-Invested Personal Pension) is a UK-based personal pension scheme designed for expats and non-UK residents. It functions similarly to a standard UK SIPP, allowing individuals to manage their pension investments flexibly while living abroad.

Key Features of an International SIPP

1. UK-Regulated – Despite being marketed for expats, an International SIPP is still regulated by the UK Financial Conduct Authority (FCA) and remains a UK pension for tax purposes.
2. Investment Flexibility – Allows investments in a wide range of assets, including stocks, bonds, mutual funds, and ETFs.
3. Non-UK Resident Friendly – Specifically structured to allow non-UK residents to manage their pensions more easily.
4. Avoids the 25% Overseas Transfer Charge – Unlike a QROPS (Qualifying Recognized Overseas Pension Scheme), keeping your pension in a UK SIPP avoids the 25% overseas transfer tax imposed when moving a UK pension abroad.
5. Potential Tax Benefits – Some financial advisors promote International SIPPs as a way to optimize tax planning, but Spanish tax authorities may still consider it an investment subject to Wealth Tax and Capital Gains Tax (CGT).

Why Do Expats Consider an International SIPP?

• Retaining UK Tax Benefits – Funds remain in the UK, so UK pension protections still apply.
• Investment Control – Allows expats to manage their investments directly.
• Tax Planning – Some expats explore SIPPs as an alternative to moving their pension to a QROPS, which may be subject to additional fees and transfer taxes.
• Advisor Management – Some SIPPs are structured to allow EU-based financial advisors to manage the pension, though this does not change its UK tax status.

Key Considerations Before Choosing an International SIPP

1. It is NOT a separate pension type – Despite the name, an International SIPP is still a UK pension and does not provide any special tax benefits outside the UK.
2. Spanish Tax Treatment – Spain may classify pensions as investments, meaning they could be subject to Wealth Tax and CGT.
3. Hidden Fees – Many expats report high management fees, hidden charges, and long lock-in periods from financial firms promoting these products.
4. Local Tax Advice is Crucial – Since Spain has complex tax laws, consulting a Spanish-based tax advisor is necessary before making any pension decisions.

Alternative Pension Options for Expats in Spain

• Keep Pension in a UK SIPP – If managed correctly, this can be a low-cost and flexible option while remaining under UK pension rules.
• Transfer to a QROPS – Some expats transfer pensions to QROPS in Malta or Gibraltar, but this may trigger a 25% overseas transfer tax and higher fees.
• Consult a Tax Advisor – Since Spanish pension taxation is complex, speaking with a qualified advisor before making changes is highly recommended.

Final Thoughts

An International SIPP can be a good option for some expats, but it is not necessary for everyone. The Spanish tax implications of moving or keeping a UK pension should be reviewed carefully with a Spanish tax professional before making any decisions.