GOALFIRE

I'd be very grateful if you'd share how this works out for your wife once you find out? I think I'll wait until then before I commit to paying any back years (or future years) voluntarily just in case my contribution will trigger a WEP (I'll have about 21/22 years of SS earnings before I stop working). Though paying into OAP may still be a good idea its' just the payback time may be longer if WEP is applied to additional payments I may make - will need to bust out a spreadsheet and calculate if it's worthwhile of not!

durham_lad

I’ll report back when she goes through this. If VCs are counted the same as years earned from work then WEP will definitely be a big hit.

GOALFIRE

Excellent, thank you.

Does anyone know how (or if) WEP works if you take SS before your OAP, say one would start SS at 65 before OAP starts at 67. Do you get a couple years of SS at full rate then take a hit, or do you slip under the wire so to speak if it's a one time assessment?

Also how does the exchange rate work when calculating the WEP - is that done one time only at the time you apply for SS and WEP is calculated or is there some periodic reevaluation?

Pulaski

The former.
From what has been reported here on BE, the rate at retirement is fixed forever for the purposes of WEP.

Fionn

Back two months later with an update and more questions…

HMRC have now confirmed I can make Class 2 catchup payments - so good news! At the very least I’ll continue making Class 3 payments in coming years when back in UK to maximize my forecast. Even though any UK state pension gains are 50% reduced by IRS WEP I think this is still a no brainer, right?

I had missed this before but appears my wife can claim US Social Security "spousal benefits" (https://www.ssa.gov/oact/quickcalc/spouse.html) based on my US employment record. Seems like the monthly benefit is ~50% of mine. This looks to good to be true!! My wife is also UK citizen, did not work while in US, would not claim before full retirement age and by then would be back in UK. Is there a catch that I'm missing here? Expect she will need to register to get an account with SSA and so probably need to give them a call. (Also assuming that there is no collateral WEP impact too, right?)

durham_lad

It’s the norm that a non-working spouse gets SS at 50% of the working spouse, and on death of the working spouse that is boosted to 100%. As I am a little older and less healthy than my wife I am delaying taking my SS until age 70 to maximize the SS she will receive as my widow. (SS increases 8%/year until I take it)

Pulaski

Absolutely!

Also bear in mind that the proportion of your UK state pension paid for with AVC's while you are working in the US is not subject to WEP*. Eg. if you pay 7 years of Class 2/3 towards a total of 35 years of contributions (the maximum denominator is 35 years) then only 28/35ths (80%) of your UK state pension is WEPable.

* The rules for WEP state that WEP is applied to "pensions that were paid for with income that was not subject to SS deductions", which includes, most commonly, US government workers who have their own retirement savings system separate from the SS system, but the same rule snags pensions earned outside the US, but this excludes the voluntary Class 2/3 contributions because they were paid with income from which SS deductions were made. .... Same as a US company pension, 401k, or IRA.

Russet

Yes she will receive spousal SS benefits. The spousal benefit does not increase past her retirement age but will be reduced if claimed earlier. The maximum benefit is 50% of your spouse’s retirement benefit at his or her Full Retirement Age (FRA). The other point to note is I understand the spousal SS benefit is 50% of your WEP'd Social security not 50% of your full retirement benefit at retirement age.

Jerseygirl

If the spouse has never worked in the US and the partner is alive...do they get 50% SS benefits?

Fionn

This is an unexpected bonus :-) What's concerning me now is wondering about what else I've overlooked!

So wife should start claiming “spousal benefit” at FRA and, all things being well, I can independently postpone my claiming to maximise my benefits.

Checking my understanding... If I have a grand total of only 20 years UK contributions: 10 years while working in UK, 5 years AVCs while working in US and 5 years Class 3 when back in UK; then only 75% of UK pension is WEPable. Is that correct?

Thanks. Is there somewhere I can go to read up more?

Pulaski

Yes, you are correct, the 5/20 years (25%) of state pension paid while you were in the US is not WEPable.

The flip side is that other non-US pensions are also WEPable if they were not paid for with funds on which SS deductions were levied.

Beraider

Regarding Voluntary NI Contributions and WEP:

It's my understanding that WEP is based on a foreign pension "as a result of employment". Voluntary contributions are not considered "as a result of employment" therefore any years of UK pension resulting from Voluntary Contributions will not be considered in WEP calculations. This is in addition to those years where Voluntary Contributions were made whilst working in the US and paying US FICA or SS deductions.

In my case I have been paying Voluntary contributions since my return to the UK in 2019 and will continue for another 4 years for a total of 6 years. 6/35 of my UK State Pension will be excluded from WEP along with 12 years from Voluntary Contributions whilst working in the US and paying FICA for a total of 18/35 excluded from WEP.

Beraider

As an aside, President Elect Biden and VP Elect Harris have both indicted a desire to eliminate WEP.

Fionn

Great! In my example above then that would mean those 5 years of Class 3 AVCs are also not WEPable?​​

Does the salary amount earned at a particular location (e.g. while in US vs UK) factor into the equation, or is the calculation solely based on duration spent in each location?

Where is the best place to research all this further?

Beraider

If those 5 years you refer to were purely voluntary and not connected to work then yes.

WEP is calculated at max 50% of the foreign pension. So if 10 years out of 20 years of the foreign pension are used for WEP calculations, your SS will be reduced by a max of 50% of 50% of your UK Pension. Max WEP is payable if 20 or less years of substantial SS contributions and is reduced for each extra year of SS contributions to 30 years after which WEP is not applied.

https://www.ssa.gov/international/wep_intro.html