Magnum16h

I am new to the forum but have read some old posts about this subject. Hope someone can help me.

I have started receiving my UK Pension (I contributed for 17 years so it is not a full pension) and have it paid directly into a sterling offshore account in Isle of Man. It accumulates.

I live in the US and I am expecting to retire in another 4 years or so. By then I would have worked in the US for 30 years. I have 3 questions.

1. If I work for 30 years and have contributed to SS all that time do I avoid WEP?
2. If I retire a little sooner with only having worked here for say 28 years, does WEP apply and how much will it be reduced because of my UK pension?
3. Will keeping the pension in an offshore account be OK (tax free) until it tops $10,000 and then I will be liable to pay tax on it?

Hope someone can give me some advice.
Thanks

john in oz

The following is a general response as i am not a full expert on the US:

1. If you have 30 years of social security then Windfall Elimination Provision is not payable or applicable.

Retirement Planner: How the Windfall Elimination Provision Can Affect Your Social Security Benefit

2. See the chart via the link .

The info on WEP on foreign pensions is found on the social security administration site:

https://secure.ssa.gov/poms.nsf/lnx/0200307290

3. I am not a tax expert but you are now talking about 3 different country tax areas - UK , Isle of Man and the USA.

The US Tax Treaties would need to be considered and if there is no exemptions there then it would be presumed that it is a taxable income. You will have to check with the Internal Revenue Service as well as your state Treasury for any applicable taxes.

http://www.irs.gov/pub/irs-pdf/p901.pdf

Summary. Basically contact each relevant department (and country as well) and simply ask the questions and get the umpires decision on this all as it is way too complex to discuss here in detail. We can not give advice via this means.

I hope the above helps you cheers John

Magnum16h

Dear John

Thanks for the informative reply. The links regarding WEP are very useful and will help me make a decision.

The tax implication will be fine as the IRS permits up to $10,000 outside the US before there are tax implications. Isle of Man is a UK Tax haven so it is not taxable there. I wanted to have the UK pension to go there for now until I can figure out the retirement and Social Security process. It seems clearer now.

You have been very helpful.
Thanks

john in oz

Happy to help all the best cheers John

Vadio

This statement intrigued me. Could you explain what you mean?

If you are resident in the US, your worldwide income is reportable, and in most cases, taxable. Certain foreign income MAY not be taxable under a tax treaty, but never, ever have I seen a reference to the IRS permitting up to $10K outside the US.

Are you sure you aren't confusing this with the $10K aggregate value of foreign bank accounts which means that you have to file a FBAR?

Magnum16h

Yes, that is what I mean. It is explained in the link below.

Report of Foreign Bank and Financial Accounts (FBAR)

Vadio

I've been filing FBAR returns for years. That goes to the Treasury Department; it's not part of your US Federal tax return. Any interest earned no mater where the account is held is reportable and subject to US tax.

I'm still confused about your statement that "the IRS permits up to $10,000 outside the US before there are tax implications".

Magnum16h

Please don't be confused. I am not offering advice to anyone here. I was asking for advice on this platform and got my answers. It seems from your post that I made an error in a comment I made to another responder. I'm sure you're right and I thank you for pointing it out.

nun

If you have at least 30 years of FICA payments there will be no WEP....with 28 years the WEP will be small. Google "WEP calculation" and you'll find an online calculator at the SSA website. Any amount of the UK state pension that is attributable to voluntary National Insurance Contributions does not count towards the WEP calculation, only NICs from non-US SS wages count.

The $10k limit you are quoting is the FBAR limit. If you have $10k or more in foreign accounts you have to declare that to the US Treasury.....it has nothing to do with paying taxes. If you are receiving UK state pension and are a US tax resident you must pay US tax on it......there is no UK tax due and you can file a US-Individual 2002 form so that your UK tax status is NT. So those deposits to IOM account must be included on your US 1040 on line 16 along with any interest the money earns (on the "bank interest line").

Magnum16h

Thanks Nun. I really appreciate your reply.
Best wishes,

a18ion

Hi nun, Is there a US SS page or document that explains that. I understand the concept that voluntary contributions result in a pension amount that is "not related to non-SS wages", so WEP would not apply. In practice, when you apply for UK pension via the US/UK Social Security coordination system, who does that calculation? In my case, half my UK pension years will be based on Class 3 voluntary NIC, so who will figure that out? Me? UK DWP? US SS? Any pointers? Thanks

nun

Yes there is. See section 5

https://secure.ssa.gov/poms.nsf/lnx/0200307290

I haven't applied for my UK pension yet and I don't know anything about the "coordination system". When I apply for my UK pension I'll send in an International Pensions form. On there you have to give details of your US SS payments.

When you apply for US SS you have to tell them about any pensions you are getting from non-SS wages. You should figure the amounts out yourself and enter those on the form. For me I won't even mention my UK state pension because it's all from voluntary NICs....however I will have to include my MA state pension which is all from non-SS wages.

a18ion

Thanks for the helpful link to the US SS page. Very clear.

The coordination I'm thinking about is the credit in one country for years of service in another. When I looked awhile back, the general rule seemed to be you applied in your country of current residence for pensions from places you previously lived/worked. And then your current home country contacted the pensions folks in the other country(ies) to work things out.

The DWP website now seems to require that for residents of other EU countries, only. But if you're in the USA, you write to DWP directly.

I have to coordinate between Canada, the UK and the USA, and so my plan was to leave the coordination of counting credits in all three places to the US SS admin. That seems to have changed. Have now checked the Canada website, and, they too, now want me to apply directly to a special unit in Canada for USA coordination (rather than going through the US folks).

Seems there's hardly any point checking up on this stuff ahead of time, because the rules and procedures are always changing...

nun

The situation might be complicated if you are using a Totalization Agreement to claim benefit in one country using credit for payments you made in another.

If you qualify for benefits in both countries based solely on your contributions in that country then you can just apply directly.

captkw

I just found this forum.
As I understand it, UK NI contributions prior to 1975 were "stamps" which were not based on the employee earnings. Is a UK pension based on employment prior to 1975 therefore exempt from US SS WEP?