I expect many of you are aware that UK personal pension rules have changed dramatically this year and there are further changes planned by the Government in 2016 which might include the option to sell an annuity back to a provider if you are currently drawing income from one.
Previously you were restricted to how much you could access from your pension as a lump sum but this requirement has been scrapped in favour of allowing people to draw whatever they want from their fund, the whole lot if they want to in one fell swoop.
So how can you benefit from the new rules and where does QROPS stand in the equation? I sometimes think the more options you have the more difficult it is to make a decision. Thinking about my own circumstances I guess the two overriding concerns are how can I maximise my income whilst ensuring my pension will last for the rest of my life and how can I draw my benefits in the most tax efficient way whilst ensuring that if there is anything left over when I’m gone that my dependents will be able to gain some advantage from that without paying tax.
If you were still tax resident in the UK your choices would be a bit easier. If you wanted more than 25% tax free you could have it and be taxed at your highest rate on the additional amount you withdraw. As with most things in Spain things are a little more complicated which is why you need to be clear on what you want to achieve.
Spain doesn’t recognize the 25% lump sum as a tax free payment in the first place – part of this sum will be subject to tax if you are Spanish tax resident at the time you receive it. So taking more lump sums will be like red rag to a bull (no pun intended).
Where does QROPS fit into the new rules? One major disadvantage of leaving your pension in the UK is that if you die post age 75 and your beneficiaries require a lump sum this will be taxed at 45%. With a QROPS regardless of whether you have started taking benefits or not provided the QROPS member has been non resident for at least five complete tax years the death charge will not apply.
I mentioned taking income in a tax efficient way. It is possible to structure income from a QROPS in an extremely tax efficient way and ensure that your beneficiaries can enjoy the same tax benefits when you are no longer around as well as avoid some of the problems associated with Spanish Succession Tax.
We know how important retirement planning is for expatriates like you and me. That’s why we would like to offer you a FREE Retirement Planning Assessment (worth £500) where we will carry out a full review of your pension arrangements. If you already have a clear understanding of your current situation we can offer a FREE tax planning assessment instead (worth £1,000). Just think you will be getting FREE advice on tax planning for Spanish residents as well as retirement, savings and wealth tax mitigation strategies.
We have all come to Spain for a better life let us help you make sure your retirement planning is right for you and that the tax man doesn’t spoil that. Call now on tel 951319727 or email firstname.lastname@example.org.