Elmodog

Has anyone living here in spain tried to cash in their UK pension. I need cash and the options open to expats here in Spain are limited. Does living abroad make it possible to cash in all of a UK pension?

Fred James

It depends what type of pension you are talking about.

Most pensions allow you to take a lump sum when you retire but getting any more out of it gives rise to tax problems as you get tax relief on the payments so you are restricted in what you can do.

It is also worth mentioning that the lump sum is not taxable in the UK but it is (partly) taxable in Spain if you are tax resident in Spain.

snikpoh

At the age of 50 (and above), you can take up to 25% of any personal pension - tax free in UK.

Once resident in Spain, I'm not entirely clear as to how the rules change - Fred, can you elucidate please?

Elmodog

Hi Fred and thanks for your prompt rely.

Fred James

If you take your pension while tax resident in Spain, any lump sum taken is taxable. The tax is only paid on the notional interest earned while your money was invested in the pension fund.

For example, if your total contributions over the period were 200k and the ending value of the pot was 300k then clearly the "interest" earned is 100k, or a third of the total.

So, if you took 25% of the pot as a lump sum ie 75k then the same ratio is applied so 25k would be considered to be income. As it is a pension it is treated as investment income and taxed at the rate of 18% irrespective of the amount.

The example given relates to a personal pension where the amounts are easy to calculate. For other types of pensions such as company pensions I believe there is a fixed percentage used of 40% for the "interest" element. In either case, if these rules are likely to give you a problem, then timely professional advice is essential.

YMF

There is a scheme called QROPS which I think gives other options for expat pensions. Don't know much about it but if you google it you will find loads of info.

snikpoh

Be very careful with QROPS, it's not appropriate for everyone AND you still need to buy annuities. That is, it's not just a way to get at all of your pension money!

Chiclanagir

Very much dependent on your age you can take a personal pension as cash if it is under 15k. You will pay tax on this but if you are earning very little you may get the tax back as a rebate. My husband has done this. Also it is worth looking at seeing if you can take a company `pension early. I did this with my Pru pension - the difference of waiting a year for it was negligible. In both cases we were living in Spain but that was no problem.

Elmodog

The reason I asked the question is because I have seen an ad for a company offering to release ALL the cash from a UK pension. As I am under 50, I wondered if anyone else had looked into this.

Chiclanagir

I think you will find you need to be over 50. Also you don´t need a company to do this for you and charge..... just write to the company who manages your pension.

jdr

The financial advisors get paid by the insurance company also, big money for what little they do.

TheArmChairDetective

Out of interest, if you have a pension that is linked to the old age pension (where you get less once you hit 65 by the amount you will receive in the O.A.P) and your death surely you could only cash in "years" .
Once you have cashed in a part of the pension what happens if you die, does the payment have to be returned?

Fred James

Useful info on this point here

http://www.thisismoney.co.uk/ask-an-...in_page_id=138

And on the subject generally, here

http://www.fsa.gov.uk/Pages/Library/...2003/014.shtml

Chiclanagir

2. If your pension savings are very small, then, rules permitting, you might be able to cash in your pension on the grounds that the amount is trivial. To qualify for this definition, the value of all your personal and occupational pensions are added together and must be below a figure declared by HM Revenue and Customs. For this year the figure is £15,000.

Elmodog

Thank you everyone for replying to me. I have seen a company advertising in Coin who say they can get mw ALL of my pension 82K (less expenses) in about 10 weeks. I am thinking about it.