theOAP

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

dunroving

Thanks, OAP. As with several of these threads, I plan to download and save for future reference.

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.

durham_lad

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

dunroving

I wonder what would be the situation in the following hypothetical scenario:

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.)!

durham_lad

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?

Pulaski

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.

robin1234

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.

theOAP

IMHO (US SS was the last pension I applied for so I knew the details of the other 5.) When you apply, you do not need to furnish details of future pensions, only an affirmation that you will be receiving them, and roughly about when. Part of your responsibility, as detailed in the SSA booklet on foreign pensions and recipients resident abroad, is to notify the SSA when the newest pension begins and the details of the pension. The SSA will, of course, keep a record of your statement regards possible future pensions. The SSA has the right to reclaim benefits already paid if it's found you have not declared a pension which would have reduced your US SS amount.

See Q1. IMHO, WEP is recalculated as and when a new pension starts being paid. Something may happen where the pension you thought you were going to receive does not materialise, so a new WEP amount would be calculated only when the newest pension actually starts.

See Q1 and Q2. But I think there may be more to your question. I don't know if ALL pensions are recalculated at the exchange rate in force at the time of a new second or third pension, or if previous calculations are maintained and only the newest pension is calculated at the rate in place at that time. Sorry.

Critical question! Yes, be aware that on the day either Baltimore or the FBU OK the US SS pension, the exchange rate on that day will determine your starting US SS amount. £500 of UK pension could reduce US SS by $750 if the rate is USD1.50:£1, but would be $1,000 if the rate were USD2.00:£1. Once the initial starting amount of US SS is set, it will never be reset (unless there is a new additional pension). Yearly COLA increases will always be based on that starting amount (plus subsequent years COLA increases).

Yes, if you are above the Max WEP, say at both 1.00 and 2.00:£1, any exchange rate in force on the day (provided it is no less than $1.00:£1 or over $2.00:£1) will make no difference to your US SS benefit. The same holds true if you are above Max WEP (at all rates) and you start receiving a second foreign pension. The SSA is only allowed to take so much blood (Max WEP), and no more.

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.

Pulaski

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.

theOAP

If you are in the US, you can apply at a local office even when you have foreign pensions and WEP applies, or contact the SSA International office in Baltimore.

Now that IS an interesting question. I'm vaguely aware that for a standard US SS pension (no foreign pensions and no WEP), after a set number of years you may repay all benefits paid up to that point, and then re-apply for a new SS pension if it is of benefit to you. Whether that can happen when WEP/foreign pensions are involved, I don't know.

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)

durham_lad

Thanks OAP, that is what I was hoping to hear.

dunroving

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.

theOAP

Pick your local office carefully. There are tales of strange statements being made at some local offices, while others are very much on the ball (and have contacted Baltimore for confirmation).

robin1234

You're in good shape then and will be able to give the rest of your wealth to the Church, SPCA, alma mater etc., and live off SS & OAP

theOAP

This may be much more applicable to kodokan than dunroving, but it's an interesting thought, under the soon-to-be new UK State pension rules, to withdraw and close out any UK pension, prior to applying for US SS, which would could have adverse effects (WEP) on the US SS.

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.