Money Markets & Corona virus

Hi Ray , we only want access to the tax free portions and want to leave the rest invested , using drawdown in the future as and when we need to. Not trying to evade paying taxes as we know we’ll have to when resident . We were advised by a tax specialist in Spain to take tax free portions during the second half of this year ( and I think also by one of the lovely people on this forum ) as it wouldn’t be classed as taxable in Spain . My concern is the fact that our shares & small pension pots might be worth an awful lot less by the second half of this year & it may  be too costly to make our permanent move to Spain.

Hi Mags,

I don't understand why you were advised by a tax specialist in Spain to take the 25% tax-free portions of your UK private pensions "during the second half of this year".  Have you confused this with being advised to obtain your residency in the second half of the year?  If you're planning to make a permanent move to Spain later this year, it's the timing of your residency application that will have implications for your tax-free sums, i.e. whilst you're legally obliged to apply for residency within 90 days of moving to Spain, you don't become fiscally resident until you've lived here for 183 days (6 months + 1 day).

Kind regards,

Kim

Isn't that why the advice would be to take the pension tax free lump sum out in the second half of the year (or before of course). That would then give the 6 month +1day time to not be tax resident in Spain and therefore avoid paying tax on the lump sum drawdown?  

Exactly!  Unless there's a specific reason why Mags would profit from leaving the tax-free lump sum in her pension fund for another 6 months, it's irrelevant when she takes it, so long as it's this year and before she obtains residency.  My query is that I would have expected the advice she's received that references, "the second half of the year" to be in relation to when she obtains residency, not when she takes her lump-sum.

But as she says they are thinking of moving out "later on this year" the advice to take the lump sum before they become resident is good. Maybe they gave the advisor a more specific date? 

I don't understand why you keep repeating what I've already said, LOL!

Hi Kimmy, I think I possibly need to start writing everything down that I’m told ! I spoke to a person in a company that was recommended to me and I believe that is what was advised, to take 25% tax free amount in the second half of this year, but I think I need to speak to him again. Many thanks for your help, it’s such a huge step to take so I appreciate all the great advice/ information from this forum .

Hi Mags,

I appreciate you may have shared personal information with the tax advisor which you would not wish to share on an open forum, and that may have led the advisor to suggest you should not take your tax-free lump sum until the second half of this year, but it's really important that you do this before you obtain residency, especially before you become fiscally liable in Spain.  Also, have you taken advice from a financial advisor in the UK?  This is very important too.

My husband and I were in a similar position to you in 2016, so don't hesitate to contact me, by private message if you would prefer, if there is anything in this respect that you would like to discuss this in more detail.

Kind regards,

Kim

have you looked at you fund values since the equity markets started dropping? Do you know what you are invested in?

it might not be as bad as you think.

I suppose there are broader questions for all of us about assumptions we make in terms of annual growth versus what we consider to be a safe rate of withdrawal from pension pots/ sipps. I don't know if you have a UK financial advisor or how your fund allocations are composed but maybe you should consider downgrading expectations on year on year returns and check on your fund distribution to make sure it matches your risk appetite and aspirations?

That said we also plan to take a 25% tax free take from my wife's SIPP before we become tax resident in Spain and I would agree that at face level it makes sense to minimise the next few years tax bill in Spain but the trade off will be how much future growth you lose and what inflation does to the cash deposit.

Good luck but remember there will be more ups and downs in the markets in the years to come :)