Are Working British Expats better off moving to Spain to get the higher State Pension

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Are Working British Expats better off moving to Spain to get the higher State Pension


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Old 25th December 2014, 09:08 AM
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Default Are Working British Expats better off moving to Spain to get the higher State Pension

Quote from the Skipper:
My Spanish neighbour, a retired road construction foreman, told me that he has a State pension of €1,600 a month. Another Spanish friend, a retired chef, told me that his State pension is about the same. I have 40 years contributions into the UK NI system and was a higher rate taxpayer for most of my working life but will be lucky to receive anywhere near half of this when I reach 65.

What Gov.UK has to say about the matter:

Living in Spain - Entitlement to a Spanish State Pension for those who spent the final part of their Working Life in Spain

I'm sure there are lots of 'ins and outs' as well as 'ifs and buts'
But with all the Final Salary Pension Schemes gone in the UK and the
rest of the Company & Private Pension plans dependent on the vagaries of
the Stock Market. More and more people are falling back on the State
Pension to make up the short fall.

All that the working British Expats are told about the matter is:

Entitlement to a Spanish retirement pension

After working in more than one European Economic Area country, it is
possible for your contributions from each one to be taken into account
when calculating your pension or benefit.

If you have worked in Spain for at least one year you may be entitled
to a Spanish retirement pension, provided you meet other entitlement
conditions. For information on how and when to claim your Spanish
retirement pension or how your contributions in the UK can contribute
toward your entitlement to a Spanish retirement pension, contact
your local office of the Instituto Nacional de Seguridad Social (INSS).

When applying you must give as much information as possible about
your working life.

Anyway - I'm sure we will all be interested to hear from other working
Expats who have retired on a Spanish State Pension and whether
they were better off or worst off, than if they retired on a UK Pension
paid in Spain. Which will all boil down to the cost of living in Spain
compared to UK, area you live in and exchange rates, etc, etc.
not to mention any changes in UK or Spanish Govt policy concerning
the State Pension before you retire.
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Last edited by Williams2; 25th December 2014 at 09:15 AM.
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Old 25th December 2014, 09:45 AM
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I couldn't begin to answer your actual question, far too complicated for me!

However, I found this information regarding Spanish pensions quite enlightening.


ExpatBriefing.com | Pensions for Expats in Spain

So, to achieve a 100% state pension in Spain one currently has to have made 35 years of SS contributions, rising to 37 years fromm 2027. It goes on to say that anyone who has got a full contribution record can expect their pension to be around 80% of their final earnings.

Now, to contrast that with someone receiving a "gold plated" UK public sector pension scheme (who would have joined the scheme many years ago so is still entitled to the pension on a final salary basis rather than career average as they are now for more recent entrants). To achieve the maximum pension of half final salary, one would need to have been a member of the scheme for 40 years, paying (apart from the Civil Service which used to be non contributory, but isn't now) typically 6% of salary in employee's contributions. Plus a Basic State Pension, currently just under 6K I think. Doesn't amount to anywhere near 80% of final earnings, does it?

Those who haven't yet retired will not receive the new Single Tier Pension at the full rate if they spent all or part of their working life contracted out of the State Second Pension because they were in an employer's pension scheme as well. They will have been paying 1.5% less in NI contributions but the reduction in their State Pension will be much more than 1.5%.

Of course, the difficulty in Spain would have been that far fewer people would have had the chance to remain in stable employment on reasonable wages, with the historically much higher unemployment rate here, even before the last recession.
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Old 25th December 2014, 10:55 AM
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Williams2 hope I've understood you but where your pension is paid has nothing to do with it. If you have say 7years UK qualifying years and then 25 years spanish you would claim your pension at least 6 months prior to your UK retirement date. You would do this through the Spanish authorities who would pass it on to the UK. The reason you contact the Spanish is that it was your last country where you had qualifying years or where you currently work.

The UK would calculate their contrribution to your pension based on UK rules. They would ignore the 10 year rule as although you have less than 10 years they have to take into account the spanish years (as number of years - they ignore the contribitions). (This protects people who have wandered Europe doing a few years here then moving on). You'd then get a small UK pension.

Normally a few years later (you normally have to work longer in Spain to get to pension age) you would apply to the Spanish authorities again. They would calculate your spanish pension. Remember however Spain has some weird rules here. You can find the latter years working has more weight than earlier years. If you have been unemployed (possible due to you wanting to take it easy leading up to retirement, or because you were made redundant) this can seriously impact your pension amount.

While in spain there is, as was in the UK, a voluntary contribution aspect many receive small pensions while some receive large pensions.

You also have to take into account pension protection (My spanish mother-in-law has just had her pension cut) and inflation protection (the three tier lock in the UK).

So basically you cannot pick and choose. And if in Spain be very careful about your options. As an autonomo you can pay in little but that will have the obvious consequences. Best always to take advice on this as it is complex and rules are continuousy changing.

Here a EU view with some examples of people working in more than one country
EU Pension claims


Last edited by alborino; 25th December 2014 at 11:02 AM.
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Old 25th December 2014, 11:31 AM
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Quote:
Originally Posted by alborino View Post
Williams2 hope I've understood you but where your pension is paid has nothing to do with it. If you have say 7years UK qualifying years and then 25 years spanish you would claim your pension at least 6 months prior to your UK retirement date. You would do this through the Spanish authorities who would pass it on to the UK. The reason you contact the Spanish is that it was your last country where you had qualifying years or where you currently work.

The UK would calculate their contrribution to your pension based on UK rules. They would ignore the 10 year rule as although you have less than 10 years they have to take into account the spanish years (as number of years - they ignore the contribitions). (This protects people who have wandered Europe doing a few years here then moving on). You'd then get a small UK pension.

Normally a few years later (you normally have to work longer in Spain to get to pension age) you would apply to the Spanish authorities again. They would calculate your spanish pension. Remember however Spain has some weird rules here. You can find the latter years working has more weight than earlier years. If you have been unemployed (possible due to you wanting to take it easy leading up to retirement, or because you were made redundant) this can seriously impact your pension amount.

While in spain there is, as was in the UK, a voluntary contribution aspect many receive small pensions while some receive large pensions.

You also have to take into account pension protection (My spanish mother-in-law has just had her pension cut) and inflation protection (the three tier lock in the UK).

So basically you cannot pick and choose. And if in Spain be very careful about your options. As an autonomo you can pay in little but that will have the obvious consequences. Best always to take advice on this as it is complex and rules are continuousy changing.

Here a EU view with some examples of people working in more than one country
EU Pension claims

H'm as I said before - there are lot's of ins and outs, ifs and buts. But to put
it in a nutshell - if you worked in the UK long enough to qualify for the full UK
State Pension and then spent the remaining 10 to 15 years of your working life,
working in Spain.
Would you qualify for the full Spanish State Pension ( upon retiring in Spain )

Obviously this clause in your useful link, makes me wonder:

How your pension is calculated:

Pension authorities in each EU country you've worked in will look at the
contributions you've paid into their system, how much you've paid in other
countries, and for how long you've worked in different countries.
The EU-equivalent rate:
Each pension authority will calculate the part of the pension it should pay
taking into account periods completed in all EU countries.
To do so, it will add together the periods you completed in all EU countries
and work out how much pension you would get had you contributed into
its own scheme over the entire time (called the theoretical amount).

To put things in perspective - the basic State Pension in the UK is £113.10
a week.
Finally - please I'm looking at Working British Expats who are paid employees
in this example - not the Self Employed, etc.

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Last edited by Williams2; 25th December 2014 at 11:36 AM.
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Old 25th December 2014, 01:04 PM
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Quote:
Originally Posted by Lynn R View Post
I couldn't begin to answer your actual question, far too complicated for me!

However, I found this information regarding Spanish pensions quite enlightening.


ExpatBriefing.com | Pensions for Expats in Spain

So, to achieve a 100% state pension in Spain one currently has to have made 35 years of SS contributions, rising to 37 years fromm 2027. It goes on to say that anyone who has got a full contribution record can expect their pension to be around 80% of their final earnings.

Now, to contrast that with someone receiving a "gold plated" UK public sector pension scheme (who would have joined the scheme many years ago so is still entitled to the pension on a final salary basis rather than career average as they are now for more recent entrants). To achieve the maximum pension of half final salary, one would need to have been a member of the scheme for 40 years, paying (apart from the Civil Service which used to be non contributory, but isn't now) typically 6% of salary in employee's contributions. Plus a Basic State Pension, currently just under 6K I think. Doesn't amount to anywhere near 80% of final earnings, does it?

Those who haven't yet retired will not receive the new Single Tier Pension at the full rate if they spent all or part of their working life contracted out of the State Second Pension because they were in an employer's pension scheme as well. They will have been paying 1.5% less in NI contributions but the reduction in their State Pension will be much more than 1.5%.

Of course, the difficulty in Spain would have been that far fewer people would have had the chance to remain in stable employment on reasonable wages, with the historically much higher unemployment rate here, even before the last recession.

Lynn - thanks for the link - happy days are here again, if what is quoted is true
for most working Expats in Spain.

Quote:
Typically, your pension income is 80% of your final salary levels if you get the full rate. Even after the pension reform, Spanish replacement rates will remain high by international standards.

The case for not moving to Spain - has been well and truly shattered to smithereens, for certain
types of Expat.
In fact I have no doubt that this will be get 'top marks' in Expats retirement plans for Spain.

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Last edited by Williams2; 25th December 2014 at 01:13 PM.
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Old 25th December 2014, 03:00 PM
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Quote:
Originally Posted by Williams2 View Post
Lynn - thanks for the link - happy days are here again, if what is quoted is true
for most working Expats in Spain.

Quote:
Typically, your pension income is 80% of your final salary levels if you get the full rate. Even after the pension reform, Spanish replacement rates will remain high by international standards.

The case for not moving to Spain - has been well and truly shattered to smithereens, for certain
types of Expat.
In fact I have no doubt that this will be get 'top marks' in Expats retirement plans for Spain.
I think "certain types of Expat" are the operative words here, though. Most of the ones I've met of working age, if they haven't been self-employed, have been working without a contract and on very low pay, so they wouldn't get a bean by way of a Spanish pension, of course.

I'm sure that's not the case in the major cities though, where people may be employed by large international companies.

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Old 25th December 2014, 04:02 PM
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Quote:
Originally Posted by Lynn R View Post
I think "certain types of Expat" are the operative words here, though. Most of the ones I've met of working age, if they haven't been self-employed, have been working without a contract and on very low pay, so they wouldn't get a bean by way of a Spanish pension, of course.

I'm sure that's not the case in the major cities though, where people may be employed by large international companies.
Of course I'm talking about British Expats in the UK who ( particularly if they have
Spanish as a second language ) could pull off the 'two card trick' having enjoyed
the career opportunities of 'employment rich UK' to spend the last 10 to 15 years
in Spain, to qualify ( or could qualify ) for the full - 80 per cent of Final Salary - Spanish State Pension.
Not that many ( if any British Expat's ) have considered these benefit's before
- for let's face it. For most of us - it's that new New Dream Home in the Sun.

I can think of many people who have been made redundant in the UK, in their
40's or 50's and struggled to find work, where Spain could be the answer.
Depending on their background experience and skill sets of course.

Now we can present 'Sound Economic Reasons' for retiring to Spain - provided
your last working years were spent, working for a Spanish employer.

Of course Expats from other EU nations might also find the Spanish Pension
benefits advantageous - by spending the last 10 to 15 years of their working life
here.

Spain is number one in the Worldwide Pensions league

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Old 25th December 2014, 04:25 PM
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Quote:
Originally Posted by Williams2 View Post
Of course I'm talking about British Expats in the UK who ( particularly if they have
Spanish as a second language ) could pull off the 'two card trick' having enjoyed
the career opportunities of 'employment rich UK' to spend the last 10 to 15 years
in Spain, to qualify ( or could qualify ) for the full - 80 per cent of Final Salary - Spanish State Pension.
Not that many ( if any British Expat's ) have considered these benefit's before
- for let's face it. For most of us - it's that new New Dream Home in the Sun.

I can think of many people who have been made redundant in the UK, in their
40's or 50's and struggled to find work, where Spain could be the answer.
Depending on their background experience and skill sets of course.

Now we can present 'Sound Economic Reasons' for retiring to Spain - provided
your last working years were spent, working for a Spanish employer.

Of course Expats from other EU nations might also find the Spanish Pension
benefits advantageous - by spending the last 10 to 15 years of their working life
here.

Spain is number one in the Worldwide Pensions league
yes - as long as they are actually working..... & with the unemployment rate as it is, what realistic chance is there of that?

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Old 25th December 2014, 04:34 PM
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yes - as long as they are actually working..... & with the unemployment rate as it is, what realistic chance is there of that?
Well there's always IT, mobile phone technology, ISP Networking, Cisco router and switching engineers, to name but a few -
although I feel sorry for those members of IT who jumped at the chance to work for PartyPoker.com - as the Gib State
Pension leaves a lot to be desired - compared to the Spanish one.

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Old 25th December 2014, 04:44 PM
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Quote:
Originally Posted by Williams2 View Post
Of course I'm talking about British Expats in the UK who ( particularly if they have
Spanish as a second language ) could pull off the 'two card trick' having enjoyed
the career opportunities of 'employment rich UK' to spend the last 10 to 15 years
in Spain, to qualify ( or could qualify ) for the full - 80 per cent of Final Salary - Spanish State Pension.
Not that many ( if any British Expat's ) have considered these benefit's before
- for let's face it. For most of us - it's that new New Dream Home in the Sun.

I can think of many people who have been made redundant in the UK, in their
40's or 50's and struggled to find work, where Spain could be the answer.
Depending on their background experience and skill sets of course.

Now we can present 'Sound Economic Reasons' for retiring to Spain - provided
your last working years were spent, working for a Spanish employer.

Of course Expats from other EU nations might also find the Spanish Pension
benefits advantageous - by spending the last 10 to 15 years of their working life
here.

Spain is number one in the Worldwide Pensions league
Unless I'm reading the information in the links wrong, though, someone would have had to have paid the full 35 years' SS contributions in Spain (to be 37 years from 2027) in order to get the pension at the full 80% of final earnings. I believe you do get a Spanish state pension after working in Spain for at least 15 years, but not the full monte, I'm afraid. As I understand it, if you'd worked for 30 years in the UK (or 35 years as it will be from 2016) then you'd get a State Pension from the UK, plus a Spanish one based on however many years' contributions you paid here. I've met a few Spanish people who've spent years working abroad in France, the Netherlands, Germany or Switzerland, and it's the same for them. They get a state pension from whatever country they worked in, plus a Spanish one as well if applicable.

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