nun

My understanding of the UK pension is that you can defer and get a larger payment. You then get the choice of how you take your pension. You can take a lump sum and a lower weekly payment or take a larger weekly payment.

UK2US1979

This is not how the UK Pension office put it. But I think you are right. They did mention the weekly "extra Pension" in addition to the weekly Pension amount. I think that would be in lieu of the lump sum. Now I have to find out how the lump sum may or may not affect the SS benefits here ( wep, if any). Probably not if I am going to show it as income or may be on line 16. Thanks for your thoughts on this topic.

On a different note, at what point does one file the individual form ( for exemption from UK tax) with the IRS here? At the time of submitting application for the UK pension or could it be done earlier. I wonder how long it takes for them to forward it to the UK.

MidAtlantic

I sent mine to the IRS just before my pension started payment and it reached the UK in less than two weeks.

UK2US1979

Thanks for the info, Midatlantic.
I was just browsing previous pages on this thread and came across this comment: <Originally Posted by norfolkbroad
(.....And, for the record, I believe that's also the case if part or all of your UK State Pension benefits are based upon the UK earnings/eligibility of an ex (wife or husband) - no WEP deduction will be made by US social security>>>

I am not sure if thats right as Nun and some others point out that the UK state pension ( which arises solely out of my 11 employment years in England PRIOR TO IMMIGRATION to the US) are subject to WEP. Any thoughts.

Now a different question: If I take the one time lump sum for the back 3 years unclaimed pension in England, Where should that be shown on the 1040. If I show it on line 21, it is "other income", and if SS is notified of an inflated AGI, kind of misleading and I am afraid that the SS might take it into account in calculating my Medicare part B premium and other benefits that I get.
Even if I show it on line 16 a, AGI would still be inflated unless I deduct it on line 16 b as non taxable. I am not sure if that would be a correct way to treat it. I think UK pension is a taxable item on the return.

Would really appreciate any one's input on this and wonder if any one had similar situation in the past.

nun

Your lump sum payment is not an annuity or pension and so I would not put it on line 16 of the 1040. As you suggest, line 21 sounds good. As this is taxable income in the US you will just have to deal with the consequences of a higher income for that year. You might want to test the consequences of taking the lump sum or the larger pension. Remember you don't get the advantage of the 25% tax free lump sum that you'd get in the UK.

Jensmate

Need a bit of advice. I was born in England but took US citizenship in 1979. After retiring at age 62 I plan to move back home to be with my family in the south of England. I will be receiving US soc.sec. pension and an income from my 401K. My partner (USA born) receives a tax-free US veterans disability.
Question:
How should I manage my 401K Keep it in a US bank or a UK bank?
How and indeed will these incomes be taxed in the UK?

Thanks in advance.

nun

You should leave your 401k money in the US...there's no tax efficient way of moving to it to the UK. Depending on your satisfaction with your 401k you might think of moving it to an IRA. There will be no tax on the 401k in the US or the UK until you take income. If you are resident in the UK you will have to pay tax on the income in the UK. As you are a US citizen then you will have to pay US tax on it too, but you will get full credit for the UK tax you've paid.

The US SS will be only taxable in the UK.....no US tax at all.

Your veterans payment is from Government funds and as its a disability benefit you might argue that it's not a pension in which case I think it would not be taxable in the UK either. Take a look at Article 19 of the DTA

http://www.treasury.gov/resource-cen...s/uktreaty.pdf

Jensmate

Thanks for replying so swiftly nun. I'm clueless where taxes are involved so bear with me while I clarify this in my head.
Are you saying that, essentially, I will only be paying US taxes since the US will given me credit for all UK taxes paid? So.....no double dipping?
Next question: at what rate is SS income taxed in the UK?

Again, thanks in advance.

nun

In most cases you will pay the UK first and then take a credit for the UK tax you pay. If the UK tax is greater than your US tax you will have a zero US tax bill.

However, it's not quite that straight forward. Different types of income and gains are treated differently depending on your residency, citizenship and the double taxation agreement. For example, your US SS will not be US taxable at all....you don't even have to include it on your 1040. However, you have to file a UK self assessment form and include it as a foreign pension. It will add to your UK income and you will be taxed at a rate depending on your personal allowance and total income.

Jensmate

I do have another question that has been posed by my partner but I'm not sure in which forum this should be posted:
I will simply be returning home my partner will be a new resident. How will the fact that we are not married affect our UK residents status?

Owen778

I recommend you create a separate thread to ask this.

nun

I'd post your question in "Moving back to the UK".

FYI if you are not married to your partner there is no obvious way for them to get a visa to live in the UK. Even if you were married, because your spouse is not an EU citizen, you would have to meet some financial criteria to get a spousal visa.

UK2US1979

Thanks for your input Nun. I too think line 21 would be more appropriate. Because of rather limited income, taxes are not really my concern. Tax on this would be very minimal, in my case. I was thinking of limitations on income for SS purposes( so that the monthly amount is not affected). Any thoughts ? I think that relates to "earned income" and lump sum is not "earned Income". Did you or any one else had any such situation? I guess, most people ( unlike me) start drawing their UK pension when they become eligible. So, There may not be any one here who may have received lump sum.

flbrit59

I'd also be grateful for a little help on this subject,if some of you chaps clever at maths could oblige please ?

I have 26 yrs paid contributions for a UK pension. I'll be 65 in 8 yrs time (2022). I'm not sure whether to pay the 4 years of voluntary contributions to bring it up to a full 30 yrs. From what l can gather,it seems like it might be a good idea ? l also understand that my wife won't get any of my UK pension if die first,under the new rules ?

l think l'll have about 24 yrs in the US social security by the time l retire,so my question is...by how much will it be reduced by the windfall elimination thing ? Will l lose a lot,and would that also affect whether l should pay the extra 4 yrs voluntary contributions ?

Any help would be most appreciated,l'm clueless on this subject..and on maths too

Thanks

Alan

durham_lad

The new UK pension after 2016 is, I think, a straight line computation over 35 years instead of over 30. The full pension will be about £149/week so you currently have 26/35ths of that and would need to contribute another 9 years to get the full amount.

Pensions Bill | The new flat-rate State Pension and what it means in practice

Below is a link to a calculator you can use to estimate how much your SS will be reduced due to WEP.

Calculators: Online Calculator (WEP Version)

http://www.socialsecurity.gov/retire2/wep-chart.htm