Retirement options
One of the big differences when you move to Spain are the options available to you for retirement planning. In the UK/Ireland we have ISAs and private/employer pension schemes which both offer good tax savings.
Saving for retirement in Spain
By Chris Burke
This article is published on: 8th February 2023
ISAs are not tax free in Spain, and the annual ‘private pension allowance’ is only €1,500 per year per person! In some employer contribution schemes you can save up to €10,000 per year, but these are very uncommon. Compare that to £40,000 per year in the UK, or in Ireland up to €115,000 per person, per year! €1,500 per year is never going to achieve any serious amount of income for retirement.
The main reason for this is that in Spain, culturally people preferred to set up a company structure or accrue properties, passing these from generation to generation. Additionally, there is a lack of incentives from the authorities to entice people to save into retirement schemes.
Pensions have been popular for retirement in the UK/Ireland because of the tax savings and potential employer contributions. Take both of those away and they are not nearly as effective, which is what happens when you move to Spain. So, what can you do if you want to plan for retirement in a tax efficient manner?
For me, retirement is not just about a pension, it’s about a retirement plan. We help clients build that retirement strategy, taking into consideration the amount of income they want, making sure their assets are highly tax efficient (such as moving them away from future income tax positions) and then making sure everything is flexible and portable, because you never know what will happen in life. This is all done by using our client planning portal, where we work together to bring this to life using the following process:
This is all done by planning, where we work together to bring this to life using the following process:
- Assess existing assets including ISAs, pensions and other savings/investments
- Understand your objectives and when/where you are looking to retire and with how much
- Understand your current and ongoing financial situation, taking into account future events such as children/grandparents
- Compile this into a strategy where we plan, implement and review
- Review and adapt as the years go by evolving the plan to fit your life
We never know exactly what’s going to happen, but one thing is for sure, with proper informed planning and regular analysis, you will be much better prepared.