UK state pension and USA social security
#436
BE Forum Addict
Joined: Apr 2011
Location: The Shire
Posts: 1,117
Re: UK state pension and USA social security
The alternative is to do it through the SSA International office in Baltimore, and all on paper. At least one poster on UK Yankee felt treatment by Baltimore was far more fair than what they had received from the FBU at the Embassy. YMMV
#437
Re: UK state pension and USA social security
To clarify, it was an interview over the telephone. There was an initial call to verify myself, followed by paperwork to my home address, followed by the FBU calling me at my home number at a pre-arranged time for the actual interview. At the end of the conversation, the interviewer warned me that the information I gave had to be valid and correct, and to make sure, they then recorded my response to an "oath" in which I had to affirm I had not committed perjury regards the details I had given. All very American. Final paperwork was sent to my home address to verify everything was correct.
The alternative is to do it through the SSA International office in Baltimore, and all on paper. At least one poster on UK Yankee felt treatment by Baltimore was far more fair than what they had received from the FBU at the Embassy. YMMV
The alternative is to do it through the SSA International office in Baltimore, and all on paper. At least one poster on UK Yankee felt treatment by Baltimore was far more fair than what they had received from the FBU at the Embassy. YMMV
From memory, I have read that they ask you about current and future pensions (in act, I think you said this above, and I have read it before). I also recall reading that whatever the value of said pensions is/are at the time you report them is the figure used from that point onwards. This raises two questions (no, three! no, actually four!):
Q1: For pensions not yet received, how the heck do you know how much you will receive? Especially for a defined contribution pension, or a final salary pension that has flexibility, e.g., to take partial pension initially (semi-retirement), and/or to commute lump sum to pension, or vice versa, it is impossible to state with certainty what your pension will be!
Q2: In the case of the above, what happens if you report Figure A (say, projected/expected pension of £5,000 p.a.) for a UK pension - is this WEP-deducted from the point you receive US SS pension, or from the point you eventually start receiving the UK pension? Are you expected to report to them when you start receiving the UK pension, or do you have to predict this at the time of the interview?
Q3: Also in the case of the above, what happens if, when you receive the UK pension, it turns out to be more than you expected (say, £7,000)? And/or the USD/GBP exchange rate has changed by then, so your UK pension is worth a different amount in USD than originally reported?
Q4: Re: the USD/GBP exchange rate, it seems advantageous to wait to withdraw US SS pension until such time as the GBP is weak against the dollar (so that the WEP'd amount is calculated to be lower, because the UK pension is worth less in USD)?
My understanding of the latter is that due to the "max WEP" rules, the amount of WEP-able pension may be the same regardless, for people with low US SS and medium-to-high UK pensions ... I seem to recall my maximum WEP will be reached solely by receiving my partial UK state pension - which again seems to negate the argument that WEP is to punish high earners who are trying to somehow play the system, and help low earners. Grumble, grumble.
#438
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: UK state pension and USA social security
I think that answering "no" to the question "do you have any pensions from earnings where SS contributions were not paid?<sic.>" would leave me feeling very uncomfortable knowing that I was receiving foreign pensions. I'm planning on applying for SS at age 70 in about 10 years and currently our plans are to maintain a US apartment and spend winters there, so I would actually be in the USA when I turn 70 and would apply locally for convenience, if allowed.
So, if you good folks could sort out what the rules are before then, I'd much appreciate it
So, if you good folks could sort out what the rules are before then, I'd much appreciate it
#439
Re: UK state pension and USA social security
I think that answering "no" to the question "do you have any pensions from earnings where SS contributions were not paid?<sic.>" would leave me feeling very uncomfortable knowing that I was receiving foreign pensions. I'm planning on applying for SS at age 70 in about 10 years and currently our plans are to maintain a US apartment and spend winters there, so I would actually be in the USA when I turn 70 and would apply locally for convenience, if allowed.
So, if you good folks could sort out what the rules are before then, I'd much appreciate it
So, if you good folks could sort out what the rules are before then, I'd much appreciate it
Person A is eligible to receive US SS pension, UK state pension and some sort of other UK pension (e.g., SIPP, an occupational defined-contribution scheme, or a final salary type occupational pension).
At the time Person A has his/her interview, or fills in the form for claiming US SS, he/she is not receiving any other pension.
Person A decides that UK state pension does not fall under the WEP rules, for reasons suggested earlier in the thread. He/she therefore does not declare it.
Person A also decides in his/her mind that he/she will take all of his/her SIPP or other pension as cash (many final salary schemes are flexible enough that you can commute pension to cash). He/she decides that taking a cash lump sum does not constitute a pension. He/she therefore does not declare it.
At the time of completing the form, Person A is being truthful as far as his/her interpretation of the WEP rules goes.
First of all, is this scenario an acceptable interpretation? (I'm asking people's personal opinions, as elsewhere in this thread, not for a professional opinion) Second, what if Person A subsequently changes his/her mind about the occupational pension and decides to take some of it as a pension? Does he/she then have to contact US SS to say Oops, I changed my mind? Or does whatever was said at the interview stand ad infinitum?
Come to that, what about other changes that occur after the interview, such as a UK pension actually decreasing for some reason? How does a draw--down pension fall under these rules? It seems in many cases it is almost impossible to give a clear answer to the question of other pensions because we don't know (whether the money will run out, whether the stick market will crash, etc.)!
#440
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: UK state pension and USA social security
Excellent questions and I like the what-if the defined pension scheme goes under and is taken over by the UK equivalent of PBGC resulting in a reduced pension. Can WEP then be re-calculated using the new pension figures?
With a fixed pension (no COLA) then the impact on SS will reduce over time so is there a way to revisit WEP, say 5 years after starting SS in a high inflation environment where the fixed income pension is now a significantly smaller % of the current SS?
With a fixed pension (no COLA) then the impact on SS will reduce over time so is there a way to revisit WEP, say 5 years after starting SS in a high inflation environment where the fixed income pension is now a significantly smaller % of the current SS?
#441
Re: UK state pension and USA social security
I will continue to read threads such as this one with interest, and I have a good number of years to think about all this and strategise, but at the moment it looks like I should explore opportunities to cash-out my British private pensions before I reach SS retirement age. The amounts aren't that great, and I could use them indirectly to fund substantial increases to my 401K i.e. live on the cash-out and max-out my 401K contributions some time after my 50th birthday when my permitted 401K contributions are higher. In doing that I should, I think, be able to mitigate most of the tax penalty of cashing out my private pensions. That said I will probably wait until closer to when I can claim SS to be sure that they don’t do something daft like make SS means tested.
In any case the large majority of my UK state pension will be based on voluntary contributions and "free" years, so should escape WEP anyway.
In any case the large majority of my UK state pension will be based on voluntary contributions and "free" years, so should escape WEP anyway.
Last edited by Pulaski; Dec 31st 2014 at 12:47 pm.
#442
Heading for Poppyland
Joined: Jul 2007
Location: North Norfolk and northern New York State
Posts: 14,543
Re: UK state pension and USA social security
Pulaski, remember that the closer you get to 30 years of substantial SS contributions, the less you have to worry about WEP. I think WEP is progressively phased out for workers with between twenty and thirty years of substantial contributions. And SS have a table online that defines what a substantial contribution is each year.
#443
BE Forum Addict
Joined: Apr 2011
Location: The Shire
Posts: 1,117
Re: UK state pension and USA social security
Q1: For pensions not yet received, how the heck do you know how much you will receive? Especially for a defined contribution pension, or a final salary pension that has flexibility, e.g., to take partial pension initially (semi-retirement), and/or to commute lump sum to pension, or vice versa, it is impossible to state with certainty what your pension will be!
Q2: In the case of the above, what happens if you report Figure A (say, projected/expected pension of £5,000 p.a.) for a UK pension - is this WEP-deducted from the point you receive US SS pension, or from the point you eventually start receiving the UK pension? Are you expected to report to them when you start receiving the UK pension, or do you have to predict this at the time of the interview?
Q3: Also in the case of the above, what happens if, when you receive the UK pension, it turns out to be more than you expected (say, £7,000)? And/or the USD/GBP exchange rate has changed by then, so your UK pension is worth a different amount in USD than originally reported?
Edit: Just to confirm once more, any time your situation changes (IE you start receiving additional foreign pension amounts which would reduce your US SS benefit if calculated), you are required to notify SSA of the change. It's in the rules, and you'll be sent a copy of the rules.
Last edited by theOAP; Dec 31st 2014 at 1:36 pm.
#444
Re: UK state pension and USA social security
Pulaski, remember that the closer you get to 30 years of substantial SS contributions, the less you have to worry about WEP. I think WEP is progressively phased out for workers with between twenty and thirty years of substantial contributions. And SS have a table online that defines what a substantial contribution is each year.
Aside from the currently unpredictable effect of being contracted out of SERPS during the 1990's I am probably "good to go" with full British state pension and a un-WEP'ed SS.
#445
BE Forum Addict
Joined: Apr 2011
Location: The Shire
Posts: 1,117
Re: UK state pension and USA social security
Excellent questions and I like the what-if the defined pension scheme goes under and is taken over by the UK equivalent of PBGC resulting in a reduced pension. Can WEP then be re-calculated using the new pension figures?
With a fixed pension (no COLA) then the impact on SS will reduce over time so is there a way to revisit WEP, say 5 years after starting SS in a high inflation environment where the fixed income pension is now a significantly smaller % of the current SS?
With a fixed pension (no COLA) then the impact on SS will reduce over time so is there a way to revisit WEP, say 5 years after starting SS in a high inflation environment where the fixed income pension is now a significantly smaller % of the current SS?
If something were to happen where a WEPed SS pension benefit could be increased due to the foreign pension amount declining in payout value (WEPable amount), yes, I would guess you may seek redress from SSA, but only going forward from the point of the reduction. (IMHO)
Last edited by theOAP; Dec 31st 2014 at 1:44 pm. Reason: CLARITY FFS. Re-engage brain.
#447
Re: UK state pension and USA social security
So, on a slightly different tack, it may be beneficial for some people to take US SS early and delay other pensions? This way, WEP would be delayed and they would maximize the amount of WEP-free US SS they receive?
In fact, if UK state pension is deemed to be WEP-exempt, it would make sense to take US SS early (age 62?), take UK state pension next (at 65 or 66), and then take other, WEP-able pensions ... and maximize cash withdrawals from UK pensions (assuming cash withdrawals aren't classed as a "pension".)
A lot depends on personal circumstances (not least of which are the expected amount from these various pensions, plus the expected WEP %), but as a general principle this has at least some merit, unless I am missing something.
In fact, if UK state pension is deemed to be WEP-exempt, it would make sense to take US SS early (age 62?), take UK state pension next (at 65 or 66), and then take other, WEP-able pensions ... and maximize cash withdrawals from UK pensions (assuming cash withdrawals aren't classed as a "pension".)
A lot depends on personal circumstances (not least of which are the expected amount from these various pensions, plus the expected WEP %), but as a general principle this has at least some merit, unless I am missing something.
#448
BE Forum Addict
Joined: Apr 2011
Location: The Shire
Posts: 1,117
Re: UK state pension and USA social security
#449
Heading for Poppyland
Joined: Jul 2007
Location: North Norfolk and northern New York State
Posts: 14,543
Re: UK state pension and USA social security
Ah yes, thx! I had forgotten about that. I will, all being well, easily pass thirty years of substantial SS contributions.
Aside from the currently unpredictable effect of being contracted out of SERPS during the 1990's I am probably "good to go" with full British state pension and a un-WEP'ed SS.
Aside from the currently unpredictable effect of being contracted out of SERPS during the 1990's I am probably "good to go" with full British state pension and a un-WEP'ed SS.
#450
BE Forum Addict
Joined: Apr 2011
Location: The Shire
Posts: 1,117
Re: UK state pension and USA social security
So, on a slightly different tack, it may be beneficial for some people to take US SS early and delay other pensions? This way, WEP would be delayed and they would maximize the amount of WEP-free US SS they receive?
In fact, if UK state pension is deemed to be WEP-exempt, it would make sense to take US SS early (age 62?), take UK state pension next (at 65 or 66), and then take other, WEP-able pensions ... and maximize cash withdrawals from UK pensions (assuming cash withdrawals aren't classed as a "pension".)
A lot depends on personal circumstances (not least of which are the expected amount from these various pensions, plus the expected WEP %), but as a general principle this has at least some merit, unless I am missing something.
In fact, if UK state pension is deemed to be WEP-exempt, it would make sense to take US SS early (age 62?), take UK state pension next (at 65 or 66), and then take other, WEP-able pensions ... and maximize cash withdrawals from UK pensions (assuming cash withdrawals aren't classed as a "pension".)
A lot depends on personal circumstances (not least of which are the expected amount from these various pensions, plus the expected WEP %), but as a general principle this has at least some merit, unless I am missing something.
I have only one consideration. Closing out a pension would equate to taking the pension as a lump sum, and therefore it would have consequences for a US tax return (IF you are a US person). Depending on the size of the payout, it may well bump the taxpayer above unseen thresholds (such as NIIT!). More food for thought, for some.
To add: under the new UK rules, closing out a pension pot entirely when first eligible will result in the first 25% being tax free for UK tax, but the remaining 75% will be taxed at the standard 20%/40%/45% thresholds and at those rates. Tax is a consideration on both sides of the Atlantic.
Last edited by theOAP; Dec 31st 2014 at 2:56 pm.