25% tax-free withdrawal.

Per99

Hi, 

We are expats with permanent residency in Spain (57yo). Our private pension is with Aviva formally Commercial Union, we have a UK bank account with HSBC. Yesterday after a 3 hour phone call to Aviva we were told that we can't take our 25% tax free lump sum because of Brexit, the guy was extremely vague and short on details, my guess is the computer said no. Has anybody had experienced this? Or have any advice?

Cheers
Per.

dunstonh

 Yesterday after a 3 hour phone call to Aviva we were told that we can't take our 25% tax free lump sum because of Brexit, the guy was extremely vague and short on details, my guess is the computer said no. 

Your guess is wrong.

 Has anybody had experienced this?

Plenty.

The transaction you wish to make is known as income drawdown.   Most legacy plans do not support income drawdown.  So, you need to transfer to a modern plan that does support that option.     That is very easy for a UK resident.  However, for an EU resident it becomes far more difficult as the new plan is a new retail financial services product and there has been no agreement between the EU and UK on financial services following Brexit.    UK companies can continue with existing products set up prior to Brexit but are not allowed to set up new retail financial products to residents of the EU unless they have a full branch in the country you are resident (there are a couple of other ways too but most companies haven't done any of them).

The Aviva rep you spoke to would have moved you to one of their modern plans but cannot do so.  So, it's not a computer saying no, but the legal position.

To facilitate the transaction you want to make, you need to contact a provider or broker that deals with expats and holds permissions to offer products and services in Spain.

molerat

There is also the tax, you are subject to Spanish tax rules.  Best place to ask would be an ex-pat forum.

A random Google explanation https://www.spectrum-ifa.com/taking-a-lump-sum-from-your-pension-when-resident-in-spain/

Per99

Thank you both, most helpful.

dshart

I moved to France just before Brexit, and I was advised if I wished to take my 25% lump sum to do it before becoming resident in France as they do not recognize the 25% tax free lump sum and as such there are social charges levied on it at around 7%.

Unfortunately for me my pension company made a right mess of things and took 3 months to cash in my lump sum and recorded it as having been taken after I became resident in France and are now trying to wiggle out of covering the social charges I will have to pay, so I am taking it to the ombudsman.

I dont know what the tax rules are in Spain, so if I was you I would look into that before taking the lump sum. I would also investigate if there are any benefits to keeping your pension pot in the UK. I had mine transferred to a HMRC compliant QROPS in Malta and can invest in almost the same investments as I was doing in the UK. I am still denominated in Sterling but will be changing to Euros soon.

There are other schemes, at least in France, with the tax laws where you can take your whole pension pot and just pay 7% social charge on the lot rather than have your 25% tax free and pay tax on future withdrawals. Not sure if same applies in Spain.

Your best bet is to seek professional advice from an IFA, but choose one who has a licence to give advice in UK and Europe.