tricky WEP question

Old Mar 30th 2023, 12:08 am
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Default tricky WEP question

Here’s a tricky question. I worked in the US and paid into Social Security for 28 years. Previously I worked in the UK for 11 years and paid another 14 years of voluntary Class 2 NICs while in the US. Since I had less than 30 years in the US, I would be subject to WEP. Under the US/UK agreement, would my 11 UK years be combined with my 28 US years to put me over 30 and therefore cancel WEP? Conversely, could these years be combined to give me 35 years in the UK and qualify for a full pension? If I’m subject to WEP, am I correct in understanding that only my 11 years would be included in the calculation and not the 12 years of voluntary payments? Thanks in advance.
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Old Mar 30th 2023, 4:49 am
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Default Re: tricky WEP question

The totalization agreement between the US and UK, AFAI understand it, is designed to qualify you for "something", when otherwise you would get nothing, and does not allow you to increase the amount you qualify for.

And yes, only pensions paid for with "income "not chargeable for SS contributions" (non-US state pensions, non-US company and private pensions, and US pensions on jobs that do not participate in the federal SS scheme e.g. federal government workers, some state governmentworkers, etc.) are used in thr WEP calculation - the fraction paid for with additional contributions while you were working in the US are not included in the WEP calculation.

If you haven't yet retired in the UK, are there any years from 2006-2007 forward that you haven't made voluntary contributions for? There may be an opportunity for you to make additional contributions for those years, upto July 2023.

Last edited by Pulaski; Mar 30th 2023 at 4:53 am.
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Old Mar 30th 2023, 9:25 am
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Default Re: tricky WEP question

You will be subject to WEP but it shouldn’t be too much since it starts to decline after 20 years and goes to zero at 30 years of SS contributions. Only the 11 years worth of your UK OAP due to work will be counted towards the WEP calculation.
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Old Mar 30th 2023, 11:41 am
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Default Re: tricky WEP question

Thanks Mr. Pulsaki. People on this board are so helpful but you in particular always come through! I'm retiring this year but still can chalk up one more payment before I do. Much appreciated.
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Old Mar 30th 2023, 11:42 am
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Default Re: tricky WEP question

Thanks Durham lad, that's good to know.
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Old Apr 29th 2023, 5:37 pm
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Default Re: tricky WEP question

Is a UK company pension income subject to WEP or only UK Government pension income. I am getting ready to make up the maximum years of Class 2 NIC before the deadline and happy to see they wont be used in a WEP calculation.
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Old Apr 29th 2023, 5:50 pm
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Default Re: tricky WEP question

Originally Posted by Slalomdude
Is a UK company pension income subject to WEP or only UK Government pension income. I am getting ready to make up the maximum years of Class 2 NIC before the deadline and happy to see they wont be used in a WEP calculation.
Yes, company pensions and personal pensions can trigger WEP - it is basically any pension "paid for out of income that was not chargeable for SS contributions", which means any/all pensions resulting from working outside the US, plus pensions from certain US government jobs that have their own pension scheme instead of contributing to Social Security.
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Old Apr 29th 2023, 7:37 pm
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Default Re: tricky WEP question

Originally Posted by Slalomdude
Is a UK company pension income subject to WEP or only UK Government pension income. I am getting ready to make up the maximum years of Class 2 NIC before the deadline and happy to see they wont be used in a WEP calculation.
Originally Posted by Pulaski
Yes, company pensions and personal pensions can trigger WEP - it is basically any pension "paid for out of income that was not chargeable for SS contributions", which means any/all pensions resulting from working outside the US, plus pensions from certain US government jobs that have their own pension scheme instead of contributing to Social Security.
Exactly. I have 2 private UK pensions plus UK OAP so will be WEP’ed on all of them, but will have 28 years of SS contributions so it won’t be too bad.
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Old Apr 30th 2023, 5:20 am
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Default Re: tricky WEP question

Can’t really understand this WEP. As I will only have 23 years of SS contributions,( many were below the maximum annual limit) I will obviously not be eligible for full SS payment. I have 14 yrs of Uk contributions and I have applied to make up the payments this year. Why is the US penalizing me with WEP when they would have to pay me considerably more if those 14 years had been in the US. It’s not like I am asking the US to pay me for the years I was in the UK .
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Old Apr 30th 2023, 5:50 am
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Default Re: tricky WEP question

Originally Posted by Slalomdude
Can’t really understand this WEP. As I will only have 23 years of SS contributions,( many were below the maximum annual limit) I will obviously not be eligible for full SS payment. I have 14 yrs of Uk contributions and I have applied to make up the payments this year. Why is the US penalizing me with WEP when they would have to pay me considerably more if those 14 years had been in the US. It’s not like I am asking the US to pay me for the years I was in the UK .
WEP is a result of the peculiar way in which Social Security payments are calculated, and that they are a function of how much you paid in to the system, not a flat rate like a UK state pension.

US Social Security is extremely generous to those who are on poverty level pay - people on very low income will literally get Social Security payments of 90% of their pre-retirement pay. At higher, but below average pay, people still get Social Security payments that are a fairly high percentage of their pre-retirement pay.

The problem is that the maths underpinning the calculations of your Social Security payments cannot distinguish between someone who is genuinely low paid, and somone who has only paid into Social Security for a few years. This would mean that someone who has worked much of their life outside of the Social Security system, either outside the US, or in a US government job that funds a retirement plan outside of the Social Security system, would be unjustly enriched if, on top of whatever other pensions they had funded, if they also received the high or very high percentage (of pre-retirement pay) from Social Security that is intended to go to the genuinely poor. .... Hence WEP, that reduces that "excess payment" by looking at the extent to which you have other pension entitlements.

And to your specific point, if you had worked in the US for 14 more years you, and your employer, would have made 14 additional years contributions, and hence you would be entitled to a higher payout from the Social Security system, and not be subject to WEP.

Last edited by Pulaski; Apr 30th 2023 at 6:00 am.
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Old Apr 30th 2023, 5:58 am
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Default Re: tricky WEP question

Originally Posted by Pulaski
WEP is a result of the peculiar way in which Social Security payments are calculated, and that they are a function of how much you paid in to the system, not a flat rate like a UK state pension.

US Social Security is extremely generous to those who are on poverty level pay - people on very low income will literally get Social Security payments of 90% of their pre-retirement pay. At higher, but below average pay, people still get Social Security payments that are a fairly high percentage of their pre-retirement pay.

The problem is that the maths underpinning the calculations of your Social Security payments cannot distinguish between someone who is genuinely low paid, and somone who has only paid into Social Security for a few years. This would mean that someone who has worked much of their life outside of the Social Security system, either outside the US, or in a US government job that funds a retirement plan outside of the Social Security system, would be unjustly enriched if, on top of whatever other pensions they had funded, if they also received the high or very high percentage (of pre-retirement pay) from Social Security that is intended to go to the genuinely poor.
. .... Hence WEP, that reduces that "excess payment" by looking at the extent to which you have other pension entitlements.
Thank you for the excellent explanation. So the calculation uses total SS contributions over your lifetime without regard to number of years of contributions, makes sense to me know. Cheers.
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Old Apr 30th 2023, 6:03 am
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Default Re: tricky WEP question

Correctly me if I am wrong, but it is still worth making up missed NI contributions even though my SS will be reduced due to the increased UK pension.
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Old Apr 30th 2023, 6:10 am
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Default Re: tricky WEP question

Originally Posted by Slalomdude
Correctly me if I am wrong, but it is still worth making up missed NI contributions even though my SS will be reduced due to the increased UK pension.
Absolutely yes, additional years are very worthwhile, AND those additional years are NOT subject to WEP. So in your case, if you had 14 years of NI contributions before you left the UK and make another 14 years of voluntary contributions to bring your UK state pension up to 28/35 of a full pension, then 50% of your state pension can/should be excluded from the WEP calculation because the years of voluntary contributions were funded from income that has been subject to Social Security deductions.
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Old Apr 30th 2023, 6:16 am
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Default Re: tricky WEP question

Originally Posted by Pulaski
Absolutely yes, additional years are very worthwhile, AND those additional years are NOT subject to WEP. So in your case, if you had 14 years of NI contributions before you left the UK and make another 14 years of voluntary contributions to bring your UK state pension up to 28/35 of a full pension, then 50% of your state pension can/should be excluded from the WEP calculation because the years of voluntary contributions were funded from income that has been subject to Social Security deductions.
Excellent, thank you 👍
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Old May 1st 2023, 4:14 am
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Default Re: tricky WEP question

Originally Posted by Slalomdude
Excellent, thank you ....
You're very welcome.
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