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Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Old Dec 31st 2010, 3:40 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by windsong View Post

I forgot you had a business. Do you know anything about starting a business in the UK or perhaps a web site to visit to find information? I am considering doing a website/graphic design business out of my residence when I get there. I know I will be 62 but my brain is very much alive and I have really good skills. I may as well put it to work.
If it's just you, it's quite simple as I understand it. You just register as self-employed when you get to the UK and then bob's your uncle. You don't have to register for VAT unless you make more than £70,000 per year from UK clients (anything you earn from US clients is not counted towards that total). There's more here: http://www.hmrc.gov.uk/selfemployed/

This is the person we used for information on taxes in the UK and US. www.towertax.com. I thought she was quite good but I also liked this guy whose company was a little more expensive [email protected]. The company is www.fitzgeraldandlaw.com. He answered some questions for us free of charge by email.

Last edited by sallysimmons; Dec 31st 2010 at 3:43 pm.
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Old Dec 31st 2010, 3:59 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by sallysimmons View Post
If it's just you, it's quite simple as I understand it. You just register as self-employed when you get to the UK and then bob's your uncle. You don't have to register for VAT unless you make more than £70,000 per year from UK clients (anything you earn from US clients is not counted towards that total). There's more here: http://www.hmrc.gov.uk/selfemployed/

This is the person we used for information on taxes in the UK and US. www.towertax.com. I thought she was quite good but I also liked this guy whose company was a little more expensive [email protected]. The company is www.fitzgeraldandlaw.com. He answered some questions for us free of charge by email.
Am I correct in thinking that you can register as self-employed even if you have a regular job (i.e., you do stuff part-time, separate from your regular job)?

I do some consultancy work but am not currently registered as self-employed (due to an odd situation regarding my current employer and "independent" consultancy work). I'm also a book author but have never registered as being self-employed, either here or the US. [note: I have always paid tax on all these earnings]
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Old Dec 31st 2010, 4:14 pm
  #48  
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by dunroving View Post
You'll probably find this out in the information on the page, but I think the following is correct:

There is a time limit on how far back you can make up for - so depending on how many years you want to buy in, it may be a case of the sooner you start looking into this, the better.

I don't think you can buy extra NI years after reaching statutory UK retirement age (which for you will be 65), so again, the sooner the better.

Almost every financial page I have read on the topic says that buying extra UK NI years in order to bump your state pension beats just about any other retirement investment.
Thanks, Dunroving. This is VERY helpful.

I am 58 now and I plan to start paying for ONE year's NI within the next year. I will not leave the US until age 62. I read in another post that if you pay in one year's NI payments it entitles you to 1/3 UK pension. I don't know what happens after that, e.g. if you were to pay in two years, I don't know what that would be worth.

I wish I had known this was so worthwhile years ago because I would have continued to pay my NI benefits. This will be a small safeguard if the US decides to do something odd with the social security payments. I don't trust them. You never know, they could pass a law that says no more social security payments to be paid to people who no longer live in the U.S. or to people who decide to renounce their citizenship. I have seen things happen in the U.S. in the last five years that I would never have dreamed possible.
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Old Dec 31st 2010, 4:15 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by dunroving View Post
Am I correct in thinking that you can register as self-employed even if you have a regular job (i.e., you do stuff part-time, separate from your regular job)?

I do some consultancy work but am not currently registered as self-employed (due to an odd situation regarding my current employer and "independent" consultancy work). I'm also a book author but have never registered as being self-employed, either here or the US. [note: I have always paid tax on all these earnings]
Very interesting I would love to know the answer because I have book in draft form
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Old Dec 31st 2010, 4:16 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by sallysimmons View Post
If it's just you, it's quite simple as I understand it. You just register as self-employed when you get to the UK and then bob's your uncle. You don't have to register for VAT unless you make more than £70,000 per year from UK clients (anything you earn from US clients is not counted towards that total). There's more here: http://www.hmrc.gov.uk/selfemployed/

This is the person we used for information on taxes in the UK and US. www.towertax.com. I thought she was quite good but I also liked this guy whose company was a little more expensive [email protected]. The company is www.fitzgeraldandlaw.com. He answered some questions for us free of charge by email.
Beautiful! Thank you, Sally.

I haven't decided if I will do something freelance, in addition to working for an employer, do it as a business in addition to working for an employer and whether I will do it as a business, without working for an employer. This will help me decide.
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Old Dec 31st 2010, 4:27 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by windsong View Post
Thanks, Dunroving. This is VERY helpful.

I am 58 now and I plan to start paying for ONE year's NI within the next year. I will not leave the US until age 62. I read in another post that if you pay in one year's NI payments it entitles you to 1/3 UK pension. I don't know what happens after that, e.g. if you were to pay in two years, I don't know what that would be worth.

I wish I had known this was so worthwhile years ago because I would have continued to pay my NI benefits. This will be a small safeguard if the US decides to do something odd with the social security payments. I don't trust them. You never know, they could pass a law that says no more social security payments to be paid to people who no longer live in the U.S. or to people who decide to renounce their citizenship. I have seen things happen in the U.S. in the last five years that I would never have dreamed possible.
My understanding is that you get 1/30 (not 1/3) of a full UK state pension for every year of NI contributions you pay for (from salary deductions) or buy (if overseas or otherwise buying "missed" years). So, if you buy 7 years for example, you will receive 7/30 of a full UK state pension.

If you are 58, your UK state retirement age may now be a little later than 60, as the government is pushing back women's retirement age (so that they catch up with men):

http://www.direct.gov.uk/en/Pensions...ion/DG_4017919

Your UK retirement age will be somewhere between 61 and 62, I think, so you might want to consider buying more than one year, and/or moving on this pretty quickly.

The state retirement age calculator is here: http://pensions.direct.gov.uk/en/sta...lator/home.asp

The government's proposed extension of retirement age for all adults (men and women) is not yet enacted, and won't affect you (I will end up retiring at about 66 or 67, I think):

"Government's announcement on changes to State Pension age
Currently, the State Pension age for men is 65. On 6 April 2010, the State Pension age for women started to increase gradually from 60 to 65, to match men’s.

The government has recently announced new proposals to increase the State Pension age. The proposed changes to the timetable are not yet law and still require the approval of Parliament.

You will not be affected by these proposals if you are a woman born before 6 April 1953 or a man born before 6 December 1953

Proposed changes affecting people born between 6 April 1953 and 5 April 1960:

The proposed changes to the State Pension age timetable, announced in November 2010, affect those born between 6 April 1953 and 5 April 1960.

Under the new proposals, from December 2018 the State Pension age for both men and women will start to increase to reach 66 by April 2020. This would mean that women’s State Pension age will increase more quickly to 65 between April 2016 and November 2018.

These proposed changes to the timetable are not yet law and still require the approval of Parliament."

Last edited by dunroving; Dec 31st 2010 at 4:30 pm.
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Old Dec 31st 2010, 4:40 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by dunroving View Post
My understanding is that you get 1/30 (not 1/3) of a full UK state pension for every year of NI contributions you pay for (from salary deductions) or buy (if overseas or otherwise buying "missed" years). So, if you buy 7 years for example, you will receive 7/30 of a full UK state pension.

If you are 58, your UK state retirement age may now be a little later than 60, as the government is pushing back women's retirement age (so that they catch up with men):

http://www.direct.gov.uk/en/Pensions...ion/DG_4017919

Your UK retirement age will be somewhere between 61 and 62, I think, so you might want to consider buying more than one year, and/or moving on this pretty quickly.

The state retirement age calculator is here: http://pensions.direct.gov.uk/en/sta...lator/home.asp

The government's proposed extension of retirement age for all adults (men and women) is not yet enacted, and won't affect you (I will end up retiring at about 66 or 67, I think):

"Government's announcement on changes to State Pension age
Currently, the State Pension age for men is 65. On 6 April 2010, the State Pension age for women started to increase gradually from 60 to 65, to match men’s.

The government has recently announced new proposals to increase the State Pension age. The proposed changes to the timetable are not yet law and still require the approval of Parliament.

You will not be affected by these proposals if you are a woman born before 6 April 1953 or a man born before 6 December 1953

Proposed changes affecting people born between 6 April 1953 and 5 April 1960:

The proposed changes to the State Pension age timetable, announced in November 2010, affect those born between 6 April 1953 and 5 April 1960.

Under the new proposals, from December 2018 the State Pension age for both men and women will start to increase to reach 66 by April 2020. This would mean that women’s State Pension age will increase more quickly to 65 between April 2016 and November 2018.

These proposed changes to the timetable are not yet law and still require the approval of Parliament."
Now I am wondering if the "1/3" that I saw was a typo

I was born in Sept 1952.

I will read the links, Dunroving. Thank you. I don't have a head for this stuff. I usually end up more confused and with more questions when I start reading.
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Old Dec 31st 2010, 4:43 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by windsong View Post
Now I am wondering if the "1/3" that I saw was a typo

I was born in Sept 1952.

I will read the links, Dunroving. Thank you. I don't have a head for this stuff. I usually end up more confused and with more questions when I start reading.
It was a typo. I did point it out lower down the page.

It would be a great deal if you could buy a pension in 3 years.
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Old Dec 31st 2010, 4:50 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by Sally Redux View Post
It was a typo. I did point it out lower down the page.

It would be a great deal if you could buy a pension in 3 years.
Thanks, Sally. I didn't notice the correction. Now I am wondering if it is worth paying into at all. One year = 1/30 of a normal UK pension. How much is that? It appears everyone over there gets the same pension even if they earned different amounts, if I am correct.
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Old Dec 31st 2010, 4:53 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by windsong View Post
Thanks, Sally. I didn't notice the correction. Now I am wondering if it is worth paying into at all. One year = 1/30 of a normal UK pension. How much is that? It appears everyone over there gets the same pension even if they earned different amounts, if I am correct.
It's so hard to know - that's why I'm subscribed to this thread!

Do you already have any years, and do you have any other occupational pensions? My understanding, which could well be wrong, is that if you have nothing, you will receive the 'minimum income guarantee' amount. This puts everyone on the same minimum.
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Old Dec 31st 2010, 5:00 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by windsong View Post
Thanks, Sally. I didn't notice the correction. Now I am wondering if it is worth paying into at all. One year = 1/30 of a normal UK pension. How much is that? It appears everyone over there gets the same pension even if they earned different amounts, if I am correct.
Paying for one year of NI will cost about £600. A full state pension is currently about £5,100, so 1/30 would be about £170 a year. You would need to live about 3 and a bit years post-retirement age to get your money back, so to speak 9so for most people, especially women, you'd make your money back many times over). But then again, you might consider receiving a pension of about £3 a week (or £12 a month) isn't worth collecting (full pension is currently just under £100/week)

A better investment might be to buy about 10 years, if you can (£6,000), which would give you back £30/wk, or £120/month, £1,700 a year. If you live to just 75 you'd get back your investment 4-fold ... and you could live to be 90 ... it all adds up.
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Old Dec 31st 2010, 5:02 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by windsong View Post
Thanks, Sally. I didn't notice the correction. Now I am wondering if it is worth paying into at all. One year = 1/30 of a normal UK pension. How much is that? It appears everyone over there gets the same pension even if they earned different amounts, if I am correct.
But most people will have paid a lot more than the £600 for each year's credit that you would pay, so for you it is really a no-brainer. Last year, my total NI contributions were in the £1,000's, I think. I know if I go back to the US, I will definitely continue to buy NI years.
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Old Dec 31st 2010, 5:04 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by dunroving View Post
Paying for one year of NI will cost about £600. A full state pension is currently about £5,100, so 1/30 would be about £170 a year. You would need to live about 3 and a bit years post-retirement age to get your money back, so to speak 9so for most people, especially women, you'd make your money back many times over). But then again, you might consider receiving a pension of about £3 a week (or £12 a month) isn't worth collecting (full pension is currently just under £100/week)

A better investment might be to buy about 10 years, if you can (£6,000), which would give you back £30/wk, or £120/month, £1,700 a year. If you live to just 75 you'd get back your investment 4-fold ... and you could live to be 90 ... it all adds up.
She would also get the full state pension if she has no other income, though.
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Old Dec 31st 2010, 5:13 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by Sally Redux View Post
She would also get the full state pension if she has no other income, though.
Are you sure? The state pension site indicates that you have to have the minimum number of qualifying years of NI payments ...

If a person of retirement age were destitute, I imagine they would be eligible for welfare benefits, but I can't find anything on the state pension site that indicates they would receive a state pension.

In Windsong's case, she will be coming back with an income, so this wouldn't apply anyway, but I'm surprised by what you say.
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Old Dec 31st 2010, 5:18 pm
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Default Re: Retirement - US Soc Sec, UK Nat Ins, and the Totalization Agreement

Originally Posted by dunroving View Post
Are you sure? The state pension site indicates that you have to have the minimum number of qualifying years of NI payments ...

If a person of retirement age were destitute, I imagine they would be eligible for welfare benefits, but I can't find anything on the state pension site that indicates they would receive a state pension.

In Windsong's case, she will be coming back with an income, so this wouldn't apply anyway, but I'm surprised by what you say.
I am thinking of this:

http://www.pensionsorter.co.uk/statepension.cfm#min

This minimum income guarantee tops up your earnings with extra state money. This is "means tested" (ie you have to prove that you don't have over a certain level of savings - which is £6,000 at the time of writing).

The minimum income guarantee is £130 a week for a single pensioner and £198.45 for a married pensioner couple. It rises a little for pensioners over the age of 80.


I wasn't sure if windsong had an income. If she has, then I think buying the NI years is great value as you said.
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