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A retirement in Spain needs a reliable, sustainable income. The UK State Pension can be a valuable income stream for many UK expats residing here. Yet what are the rules governing it? How can you get the best State Pension deal as a British expat?
Our financial advisers have assisted UK expats with these types of questions in Alicante, Murcia, Almeria and other parts of eastern Spain. Below, we explain how the UK State Pension works for British people living here.
We hope this content is helpful. If you want to discuss your financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
+34 966 460 407
Checking your State Pension
Regardless of where you live in the world, if you previously worked in the UK you can likely check your State Pension online using a Government Gateway login.
If you do not yet have an account, it should be possible to create one if you have information such as a British passport, driving licence and National Insurance (NI) number.
Alternatively, British expats can contact the International Pension Centre. You need at least 10 years’ worth of NI contributions on your record to be entitled to any State Pension at all.
To get the full new State Pension, you must have reached State Pension age after 6 April 2016 and you must have at least 35 “qualifying years” of NI contributions on your record.
In 2023-24, this income is worth £203.85 per week – or, £10,600.20 per year.
Claiming your State Pension
Your State Pension income is not automatically given to you when you reach State Pension age (which is 66 or men and women in 2023).
Instead, someone approaching retirement typically asks the Pension Service to post a State Pension claim form posted to them.
For a UK expat in Murcia, Alicante or another part of Spain, there is a different process. Here, you can email the International Pension Centre (IPC) using their online enquiry form.
You must be within four months of reaching your State Pension age. There are also some phone numbers on the link above that you can use to track your application.
Deciding how to receive your income
There are two primary options for UK expats in Spain when receiving a State Pension income, which typically arrives every 4 to 13 weeks (depending on your choice).
One option is to have it paid into a bank account or building society in the UK (in British pounds). From here, you can then set up your own transfers to a local bank account. Or, you could simply withdraw money from your UK account, in Euros, using a local ATM.
Another option is to have the income paid into your bank account in Spain. In this case, you will need to supply HMRC with the international bank account number (IBAN) and bank identification code (BIC) numbers.
One issue to consider is currency and exchange rates. If you are retired in Spain, then your State Pension income will likely fluctuate as the exchange rate between the British pound and Euro changes.
Financial planning tips for expats
If you are still building up your State Pension record and plan to move to Spain (e.g. to retire there later), then consider how your National Insurance (NI) record may be impacted.
When someone works for a UK employer and resides in the UK, their NI contributions are usually handled automatically via their paycheque using the PAYE system.
If you move to Spain for work, however, then you may need to start paying into the Spanish social security system (unless you have a certificate of Social Security coverage).
Be careful to account for any potential interruption to your NI contributions in your financial plan. For instance, suppose you have 20 years of full qualifying years on your NI record already and you plan to work in Spain.
Will you still be able to build up the remaining 15 years needed to qualify for the full new State Pension in the future? If not, then you might need to explore options such as making voluntary NI contributions from overseas.
Another potential issue for expats to consider is the future of the “triple lock” system for the UK State Pension. For UK residents getting a State Pension, this guarantees that their income will rise by at least 2.5% each tax year.
For British pensioners abroad, not everyone benefits from this. Indeed, it is estimated that 500,000 expats living in countries such as Australia, Thailand and Canada will miss out on the triple lock benefit this year.
Fortunately, for UK expats in Spain, the UK government still pays an annual increase in the State Pension. However, this policy is not set in stone and could change in the future.
To protect your retirement plan, it will help to have other sources of income to support your lifestyle in case the government ever changes the rules (e.g. a personal pension).
Conclusion & invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
+34 966 460 407