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USA to UK transfer Social Security to NI contributions

USA to UK transfer Social Security to NI contributions

Old Sep 7th 2020, 1:03 am
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by Fionn View Post
Thank you, this is really helpful. I spent some time with SSA WEP calculator today and confirmed that estimated 50% deduction.

I'm assuming WEP only applies to social security pension(s) from any non-US employments. I would then just have to update US SSA each time I commenced taking social security benefits from non-US countries which would be a fixed amount.

Or does WEP deduction also consider my private pensions as well?! That would mean taking account of potentially variable distribution amounts from private pension funds each year.
That's were the rules get messy, and I don't remember off-hand exactly how they apply, as per WEP rules it is "any pension resulting from a job where SS contributions were not deducted", so it does apply to private pensions, but not to the proportion of your state pension that was purchased with additional years of contributions while you were living in the US, as those years were paid for with after tax income from which SS contributions had been deducted.

I think I got that right so hopefully someone will be along to review my post and add their opinion.

The WEP rule actually originated for, and was designed to deal with people in US government jobs, which puts them outside the federal SS system and SS contributions are not deducted from their pay.

Last edited by Pulaski; Sep 7th 2020 at 1:38 am.
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Old Sep 7th 2020, 8:48 am
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by Fionn View Post
Thank you, this is really helpful. I spent some time with SSA WEP calculator today and confirmed that estimated 50% deduction.

I'm assuming WEP only applies to social security pension(s) from any non-US employments. I would then just have to update US SSA each time I commenced taking social security benefits from non-US countries which would be a fixed amount.

Or does WEP deduction also consider my private pensions as well?! That would mean taking account of potentially variable distribution amounts from private pension funds each year.
WEP applies to private pensions as well as far as I know. My 2 U.K. private pensions will cause my SS to be reduced by WEP. This is because those private pensions were earned with jobs that did not pay FICA in the same way some US government jobs do not pay FICA because they have their own pension scheme.

In my case it won’t be too punitive as I will have 28 years of SS contributions and the WEP penalty starts to tail off after 20 years.
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Old Sep 7th 2020, 10:44 am
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Default Re: USA to UK transfer Social Security to NI contributions

These are the two forms for voluntary national insurance catch up payments.
To apply for class 2 payments for your time abroad: publication NI38 (form CF38 at the end).
To apply for class 3 payments for time in UK: form CA5603.

Don't be confused NI38 / CF38 is the correct form even thought it really should be filled out before/during your stay abroad.

Class 2 catch up is like winning the lottery and even class 3 catch up is great value, as long as you live long enough collect your pension.

Last edited by austin_d_powers; Sep 7th 2020 at 10:58 am.
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Old Sep 7th 2020, 12:37 pm
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by durham_lad View Post
WEP applies to private pensions as well as far as I know. My 2 U.K. private pensions will cause my SS to be reduced by WEP. This is because those private pensions were earned with jobs that did not pay FICA in the same way some US government jobs do not pay FICA because they have their own pension scheme.

In my case it won’t be too punitive as I will have 28 years of SS contributions and the WEP penalty starts to tail off after 20 years.
I am I safe to assume if one had a small SIPP and it was all depleted before one applies for US SS that it would not be counted (as it's gone, spent) in the WEP calculation?

I've decided to make the Class 3 back (and future) contributions for UK OAP (according to the yearly breakdown on the GOV website I can go back to 2006-07, I called this morning but they're not taking calls for anyone unless you are 6 months from claiming OAP). Does anyone have any experience of the voluntary (past and future) contributions not counting to WEP as that might affect my decision. I should have 20 to 21 years of SS contributions before I stop working in the next couple years.
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Old Sep 7th 2020, 2:40 pm
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by GOALFIRE View Post
I am I safe to assume if one had a small SIPP and it was all depleted before one applies for US SS that it would not be counted (as it's gone, spent) in the WEP calculation?

I've decided to make the Class 3 back (and future) contributions for UK OAP (according to the yearly breakdown on the GOV website I can go back to 2006-07, I called this morning but they're not taking calls for anyone unless you are 6 months from claiming OAP). Does anyone have any experience of the voluntary (past and future) contributions not counting to WEP as that might affect my decision. I should have 20 to 21 years of SS contributions before I stop working in the next couple years.
SIPPs are not considered at all in the WEP calculation as far as I know.

My wife and I have been making voluntary Class 3 contributions for the last few years and it works fine, the money coming out of our bank every month via DD. The record online, which you can print out, clearly shows which years are from earnings and which are from VI contributions. We’ll find out end of next year how well this documentation works out when my wife applies for her SS as she only has 13 years of SS contributions. Her OAP will have 15 years of non-work contributions.
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Old Sep 7th 2020, 3:50 pm
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by durham_lad View Post
SIPPs are not considered at all in the WEP calculation as far as I know.

My wife and I have been making voluntary Class 3 contributions for the last few years and it works fine, the money coming out of our bank every month via DD. The record online, which you can print out, clearly shows which years are from earnings and which are from VI contributions. We’ll find out end of next year how well this documentation works out when my wife applies for her SS as she only has 13 years of SS contributions. Her OAP will have 15 years of non-work contributions.
Good to know that I can set up a monthly DD for future contributions, can I set that up prior to moving back do you know? Now that I think about it the pension I have is a company pension not a SIPP. The company I worked for in the UK (Pilkington Glass) put some of my money, some of theirs and I think I did some AVC's too - I'd all but forgotten about it until I got a letter from them giving me it's value. I assume this will count to the WEP, and if so if I spend it down to zero (it's only about 60K GBP in total if I recall) before I apply for SS it won't go against me?
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Old Sep 7th 2020, 4:35 pm
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by GOALFIRE View Post
Good to know that I can set up a monthly DD for future contributions, can I set that up prior to moving back do you know? Now that I think about it the pension I have is a company pension not a SIPP. The company I worked for in the UK (Pilkington Glass) put some of my money, some of theirs and I think I did some AVC's too - I'd all but forgotten about it until I got a letter from them giving me it's value. I assume this will count to the WEP, and if so if I spend it down to zero (it's only about 60K GBP in total if I recall) before I apply for SS it won't go against me?
I had direct debits set up and paying NI contributions from my U.K. bank several years before we moved back to England.

When I say I have 2 UK company pensions, they are each lifetime monthly payments. It sounds like your company pension is a pot of money that you can draw down as you wish until it is gone. That type of pension pot is not, I think, considered in the WEP calculation as it is equivalent to a US company 401k.
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Old Sep 7th 2020, 6:43 pm
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Default Re: USA to UK transfer Social Security to NI contributions

Re WEP: This will not affect me for 10+ years during which time I expect a lot will change. For now then, my WEP strategy will be to take lump sums, as much as possible, out of any private schemes (not huge amounts) before I start claiming US SS. I'm also going to consider any 401k-style investments as likely exempt.

Re NI Class 2 catchup payments: Yes, it does seem like a lottery win. When I spoke with the (very helpful) Newcastle HMRC team they indicated that making catchup voluntary contributions could increase my forecast by about an extra £20 per week. BTW: Are there any "wrinkles" with claiming UK NI benefits from abroad (would be EU countries)?
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Old Sep 7th 2020, 7:05 pm
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by Fionn View Post
Re WEP: This will not affect me for 10+ years during which time I expect a lot will change. For now then, my WEP strategy will be to take lump sums, as much as possible, out of any private schemes (not huge amounts) before I start claiming US SS. I'm also going to consider any 401k-style investments as likely exempt.

Re NI Class 2 catchup payments: Yes, it does seem like a lottery win. When I spoke with the (very helpful) Newcastle HMRC team they indicated that making catchup voluntary contributions could increase my forecast by about an extra £20 per week. BTW: Are there any "wrinkles" with claiming UK NI benefits from abroad (would be EU countries)?
with some countries such as Canada, NZ and Australia then once you start drawing OAP it is frozen. Most other countries, including the USA and EU countries, it goes up each year as it does in the UK.

The full list of FROZEN and UNFROZEN countries

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Old Sep 7th 2020, 7:40 pm
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by Fionn View Post
Re WEP: This will not affect me for 10+ years during which time I expect a lot will change. For now then, my WEP strategy will be to take lump sums, as much as possible, out of any private schemes (not huge amounts) before I start claiming US SS. I'm also going to consider any 401k-style investments as likely exempt. ...
That sounds like a good strategy, and I am planning a similar stategy myself. As there is no longer the requirement to use a personal pension to purchase an annuity I am intending to use the entire balances of my private pension accounts in the UK to supplement my income for several years before starting to draw SS in the US, thereby removing them entirely from the equation. That said, I am still optimistic that my time working in the US will be long enough to remove WEP from my situation entirely.
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Old Sep 7th 2020, 8:27 pm
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Default Re: USA to UK transfer Social Security to NI contributions

This is a helpful but rather intimidating thread!
I plan on taking my SS when I'm 62. I have paid in voluntary years to my NI but not for a long time--once it is safe to travel back to the UK (hopefully next year) I'll check how much more I can pay and whether it is class 2 or 3.

Question:
1. Would a US State Pension and Roth IRA be included in any WEP calculation? What about a 401K?
2. Once my UK state pension kicks in (at 67?) what is the WORST I can expect from WEP? If I'm receiving SS at 62, that figure can only go up, not down, correct?

Cheers
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Old Sep 7th 2020, 8:41 pm
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Default Re: USA to UK transfer Social Security to NI contributions

I just found this link, which is quite helpful:

https://www.taylortaylorusa.com/blog...-provision-wepA Guarantee

Something very important to note is that this could unfairly penalize some people and as a result your SS retirement benefits are guaranteed not to be reduced by more than 50% of the pension that is causing the reduction (i.e. your SS retirement benefits will not be reduced by more then 50% of your UK BSP entitlement, assuming your SS retirement benefits are being reduced because of your UK BSP and not some other pension).

Therefore, in 2019 terms, I think we can safely say that the worst penalty you will suffer as a result of the WEP is a reduction of $5,556 p.a. OR 50% of your UK BSP, whichever is lower. Another way of looking at is it that $5,556 p.a. is the maximum that you can be penalized if the WEP applied to you. And because of the 50% guarantee, you should always be better off claiming your UK BSP than no doing.


Also, note what it says under "Beware the Exchange Rate"--your WEP deduction is fixed on the exchange rate at the time you first declare it.

Last edited by Streetlegal; Sep 7th 2020 at 8:47 pm.
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Old Sep 7th 2020, 9:05 pm
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by Streetlegal View Post
This is a helpful but rather intimidating thread!
I plan on taking my SS when I'm 62. I have paid in voluntary years to my NI but not for a long time--once it is safe to travel back to the UK (hopefully next year) I'll check how much more I can pay and whether it is class 2 or 3.

Question:
1. Would a US State Pension and Roth IRA be included in any WEP calculation? What about a 401K?
2. Once my UK state pension kicks in (at 67?) what is the WORST I can expect from WEP? If I'm receiving SS at 62, that figure can only go up, not down, correct?

Cheers
Ed
A Roth is not included at all in the WEP calculation.

It depends on the State pension. Many State jobs paid into SS and many did not. Have a look at one of your W2s and if there is no FICA paid then the pension from that job will be used in the WEP numbers.
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Old Sep 13th 2020, 4:44 am
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Default Re: USA to UK transfer Social Security to NI contributions

Is social security taxable?

I thought I read on this forum that it was not taxable in the USA. However, online I have read that it is taxable if your combined income is more than $25k. If my state pension + social security come to >$25 then I am now assuming the SS is taxed. Damn.
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Old Sep 13th 2020, 11:08 am
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Default Re: USA to UK transfer Social Security to NI contributions

Originally Posted by Streetlegal View Post
Is social security taxable?

I thought I read on this forum that it was not taxable in the USA. However, online I have read that it is taxable if your combined income is more than $25k. If my state pension + social security come to >$25 then I am now assuming the SS is taxed. Damn.
If you are resident in the USA then what you say is exactly right. That is the normal state of affairs for all residents of the USA that receive SS, if your worldwide income is greater than $25k then 85% of your SS is taxable.

If you are resident in the UK then SS is only taxed in the UK, and all of it is taxable.
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