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HMRC Pension Forecast Questions..

HMRC Pension Forecast Questions..

Old Jun 23rd 2010, 1:33 pm
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Default HMRC Pension Forecast Questions..

Hi All, my wife and I asked the old age pension people in Longbenton, Newcastle for a UK Pension Forecast a few months ago. Mine came in the post yesterday, hers is presumably on its way.

According to the forecast I have 18 qualifying years out of 30, so will get (at age 65) a weekly amount that is a little over half of the maximum possible amount. So far so good.

They also have a table of sums I can pay to add in additional years, from 2004 to 2009. Assuming I have a few hundred pounds going spare (which fortunately I do) this seems to be a good investment, since each year's contributions I pay will increase my pension by one-thirtieth. That is approximately £3 a week or £150 a year.

First question - why are the different years priced differently? Apparently, 2004, 2006, 2007, & 2009 each cost £626.60 in Class 3 Contributions. But 2005 would be £382.20 and 2008 would be £421.20. This seems odd..??

More important question - I believe that the US Social Security will allow you to get a foreign old-age pension up to a certain amount, but will penalise you if the foreign pension goes above a certain level, by reducing your US Social Security amount. Does anyone understand these rules, or can point to a good explanation? I will have about 27 years in the US system if I retire age 62, so will get a decent Social Security amount but obviously significantly less than the maximum possible.

Essentially, I'm willing to buy extra years in the UK State Pension, but do not want to do so if it will just mean that my US Social Security is reduced..

Thanks for any enlightenment you can offer!!

Last edited by robin1234; Jun 23rd 2010 at 1:37 pm. Reason: edited to put a £ where I erroneously typed a $
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Old Jun 23rd 2010, 2:50 pm
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Default Re: HMRC Pension Forecast Questions..

Originally Posted by robin1234 View Post
More important question - I believe that the US Social Security will allow you to get a foreign old-age pension up to a certain amount, but will penalise you if the foreign pension goes above a certain level, by reducing your US Social Security amount. Does anyone understand these rules, or can point to a good explanation? I will have about 27 years in the US system if I retire age 62, so will get a decent Social Security amount but obviously significantly less than the maximum possible.

Essentially, I'm willing to buy extra years in the UK State Pension, but do not want to do so if it will just mean that my US Social Security is reduced..

Thanks for any enlightenment you can offer!!
It's called the Windfall Elimination Provision. You may find these URL's useful.

http://www.ssa.gov/international/Agr...ts/uk.html#wep
http://www.ssa.gov/pubs/10045.html
http://www.socialsecurity.gov/international/

Good reading!
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Old Jun 23rd 2010, 3:45 pm
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Default Re: HMRC Pension Forecast Questions..

Originally Posted by Zonie View Post
It's called the Windfall Elimination Provision. You may find these URL's useful.

http://www.ssa.gov/international/Agr...ts/uk.html#wep
http://www.ssa.gov/pubs/10045.html
http://www.socialsecurity.gov/international/

Good reading!
Great - those are very useful links. Thank you.

I wish there was some way of actually making the calculation though... I don't know what the maximum amount of Social Security is. But, let's say it is $2,500 per month. My latest estimates are (let's say) that I'll get $900 per month US Social Security, and $420 per month in UK State Pension. Does the Windfall Elimination Provision allow you to increase your UK Pension until UK+US payments add up to the maximum you could have got from Social Security, before the Windfall Elimination penalty kicks in? The links from Social Security don't seem to get down to the nuts& bolts of the calculation..

Also -- I'm working on a start date of 62 years of age for US Social Security and a start date of age 65 for the UK Pension.
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Old Jun 23rd 2010, 6:05 pm
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Default Re: HMRC Pension Forecast Questions..

Originally Posted by robin1234 View Post
Great - those are very useful links. Thank you.

I wish there was some way of actually making the calculation though... I don't know what the maximum amount of Social Security is. But, let's say it is $2,500 per month. My latest estimates are (let's say) that I'll get $900 per month US Social Security, and $420 per month in UK State Pension. Does the Windfall Elimination Provision allow you to increase your UK Pension until UK+US payments add up to the maximum you could have got from Social Security, before the Windfall Elimination penalty kicks in? The links from Social Security don't seem to get down to the nuts& bolts of the calculation..

Also -- I'm working on a start date of 62 years of age for US Social Security and a start date of age 65 for the UK Pension.
Sorry, can't help you but wanted to add the whole US/UK SS/NI pension thing confuses the heck out of me, too.

Mind you, I think at retirement I'll be getting so little from both sides that I should be getting some kind of refund under the "Reverse Windfall" regulations.
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Old Jun 23rd 2010, 6:09 pm
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Default Re: HMRC Pension Forecast Questions..

Originally Posted by dunroving View Post
Sorry, can't help you but wanted to add the whole US/UK SS/NI pension thing confuses the heck out of me, too.

Mind you, I think at retirement I'll be getting so little from both sides that I should be getting some kind of refund under the "Reverse Windfall" regulations.
Yeah I found a picture of that "reverse windfall."
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Old Jun 23rd 2010, 7:02 pm
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Default Re: HMRC Pension Forecast Questions..

Originally Posted by robin1234 View Post
Great - those are very useful links. Thank you.

I wish there was some way of actually making the calculation though... I don't know what the maximum amount of Social Security is. But, let's say it is $2,500 per month. My latest estimates are (let's say) that I'll get $900 per month US Social Security, and $420 per month in UK State Pension. Does the Windfall Elimination Provision allow you to increase your UK Pension until UK+US payments add up to the maximum you could have got from Social Security, before the Windfall Elimination penalty kicks in? The links from Social Security don't seem to get down to the nuts& bolts of the calculation..

Also -- I'm working on a start date of 62 years of age for US Social Security and a start date of age 65 for the UK Pension.
I can't help with the calculations I'm afraid. Try the SS (but don't mention the war!) helpline, they may be able to point you to a website.

As for your last paragraph beware of the goalposts moving. This is extracted from the UK treasury budget document this week.

1.109 Given the challenges posed by an ageing society, the Government
will review when the State Pension Age will rise to 66. This will be
supported by a call for evidence to be launched shortly. The review will be
conducted quickly in recognition of the urgent need to press ahead with
implementing these changes fairly. The Government will also consider future
increases to the State Pension Age and how best to manage the ongoing
challenges posed by increasing longevity. To ensure that those who wish to
work beyond 65 are able to, the Government will consult shortly on how
it will quickly phase out the Default Retirement Age from April 2011.
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Old Jun 23rd 2010, 7:18 pm
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Default Re: HMRC Pension Forecast Questions..

Originally Posted by Zonie View Post
I can't help with the calculations I'm afraid. Try the SS (but don't mention the war!) helpline, they may be able to point you to a website.

As for your last paragraph beware of the goalposts moving. This is extracted from the UK treasury budget document this week.

1.109 Given the challenges posed by an ageing society, the Government
will review when the State Pension Age will rise to 66. This will be
supported by a call for evidence to be launched shortly. The review will be
conducted quickly in recognition of the urgent need to press ahead with
implementing these changes fairly. The Government will also consider future
increases to the State Pension Age and how best to manage the ongoing
challenges posed by increasing longevity. To ensure that those who wish to
work beyond 65 are able to, the Government will consult shortly on how
it will quickly phase out the Default Retirement Age from April 2011.

That's the other bloody annoying/confusing/frustrating thing - how can you "plan" for retirement when you have no idea what regulations will be put in place by the government of the time? :curse:
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Old Jun 23rd 2010, 10:16 pm
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Default Re: HMRC Pension Forecast Questions..

One thing to consider. You can transfer some of your UK pension into your US SS pension to top it up to the full amount.

That may or may not produce a higher total sum than buying extra years in the UK one.
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