UK state pension and USA social security
#616
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Re: UK state pension and USA social security
Nun (or anyone)... been reading about your theory that the new state pension won't be WEPable because it's not earnings-related, and had a thought.
Are defined contribution pensions WEPable? What's paid out isn't a function of earnings, it's a function of how much was contributed, and the investment choices.
But then on the other hand, if it's a work-based scheme, then the contributions are technically earnings-related, because they're usually calculated as a percentage of salary; there is therefore an earnings level connection.
How about a private pension into which someone just made contributions themselves? I, for example, have a UK pension that was nothing to do with work, but was set up and £20 a month was paid in from our bank account, whilst I was a SAHM.
Thoughts? Am I misunderstanding the meaning of 'earnings-related' somehow?
Of course, this is largely all academic - I'm planning to just take them as lumps of money anyway! But still, I wondered.
Are defined contribution pensions WEPable? What's paid out isn't a function of earnings, it's a function of how much was contributed, and the investment choices.
But then on the other hand, if it's a work-based scheme, then the contributions are technically earnings-related, because they're usually calculated as a percentage of salary; there is therefore an earnings level connection.
How about a private pension into which someone just made contributions themselves? I, for example, have a UK pension that was nothing to do with work, but was set up and £20 a month was paid in from our bank account, whilst I was a SAHM.
Thoughts? Am I misunderstanding the meaning of 'earnings-related' somehow?
Of course, this is largely all academic - I'm planning to just take them as lumps of money anyway! But still, I wondered.
'From 6 April, 1975, people who are employed pay earnings-related contributions, based on a percentage of any salary received between the Lower and Upper Earnings Limits in a tax year. A tax year starts 6 April and ends on the 5 April the next year.'
Prior to that time, NICs were based on credits (stamps), and if I remember correctly could be paid at a post office if they were not collected by your employer. If you did not earn enough your employer could pay them for you. You could also obtain credits without paying through unemployment, and while you were at school for two years beginning in the tax year after your 15th birthday.
The 44 year NIC scheme (different for women) was based on an expected work life, not actual employment. For the purposes of a Basic State Pension this changed to 30 years (2007?) and pensions were based on ratio of NIC years paid. For those reaching Pension age in tax years 2010/11 to 2015/16, you could be grandfathered in (where you may not have qualified on the 44 year scheme) and so qualified to top up your NIC years. I paid 17 years Class 3 between 2009 and 2013, thirteen years in 2009 back paid from the price of NICs in 1996/7.
#617
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Re: UK state pension and USA social security
Eyecott wrote <Here is what I received from UK Pension in 2010:
'From 6 April, 1975, people who are employed pay earnings-related contributions, based on a percentage of any salary received between the Lower and Upper Earnings Limits in a tax year. A tax year starts 6 April and ends on the 5 April the next year.'
.......>
What is the "Lower and Upper earnings limit" and how are they determined? anyone?
I have been reading the history of the UK basic Pension on a website and it has very useful information on how the UK basic Pension is calculated and treated and what is it based on. So far , from what I have read and I shall quote some paragraphs later, Basic State Pension is not WEPable.
'From 6 April, 1975, people who are employed pay earnings-related contributions, based on a percentage of any salary received between the Lower and Upper Earnings Limits in a tax year. A tax year starts 6 April and ends on the 5 April the next year.'
.......>
What is the "Lower and Upper earnings limit" and how are they determined? anyone?
I have been reading the history of the UK basic Pension on a website and it has very useful information on how the UK basic Pension is calculated and treated and what is it based on. So far , from what I have read and I shall quote some paragraphs later, Basic State Pension is not WEPable.
#619
Re: UK state pension and USA social security
The upper and lower limits were a fixed amount set by the government, if my memory is correct they were set as part of the budget. Again from memory it was really only the upper limit that was changed frequently.
#620
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Re: UK state pension and USA social security
<...'From 6 April, 1975, people who are employed pay earnings-related contributions, based on a percentage of any salary received between the Lower and Upper Earnings Limits in a tax year. A tax year starts 6 April and ends on the 5 April the next year.'
<Good question. I assume earnings limits are your tax position, not your salary position from employment though they can amount to the same! >
I think it is because of this language , SSA seems to have taken the position that the Basic Pension is earnings related and thus subject to WEP. As nun pointed out sometime back, in his opinion, SSA has not been applying it correctly. In fact, The UK pension history page gives further elaboration on the nature of the basic State Pension which I would post here when I have more time.
<Good question. I assume earnings limits are your tax position, not your salary position from employment though they can amount to the same! >
I think it is because of this language , SSA seems to have taken the position that the Basic Pension is earnings related and thus subject to WEP. As nun pointed out sometime back, in his opinion, SSA has not been applying it correctly. In fact, The UK pension history page gives further elaboration on the nature of the basic State Pension which I would post here when I have more time.
#621
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Re: UK state pension and USA social security
There is another interesting part and that relates to contributions for Pre 1975. As I read it, for years prior to 1975, contributions were based on Flat rate irrespective of the earnings. In fact, "earnings" is not even mentioned in this context.
So, at worst, only part of the contributions, i.e from 1975-1978 could be considered as Earnings related based on upper/lower limits. I believe the criteria changed further for contributions after 1978/79.
Anyone care to comment on this?
#622
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Re: UK state pension and USA social security
If you get the current UK pension it has tow components, a basic pension that is not related to your wages ie everyone no matter how much they earn gets the same amount, and an additional or second state pension (S2P) that depends on how much you earned. It seems highly likely that there is no WEP on the basic state pension as it is not earnings related.
If you get the UK pension after 2016 it will be flat rate and not WEPable.
If you get the UK pension after 2016 it will be flat rate and not WEPable.
I would love to agree with this and anyone who has actually convinced the SSA that this is the case would be most welcomed to chime in.
However you say the basic pension and the new uk pension are not related to earnings and that everyone gets the same no matter what they earn (and is therefore not wep-able). Yet in order to get the pension you have to have earned a certain amount from work to get the NI credit which the uk pension is based on. So they are both based on earnings they just do not vary by earnings.
So anyone claiming with the SSA that the uk pension should not be Wep-ed is most likely going to be disappointed at the best and at the worst in deep trouble with the SSA if they fail to disclose the full details.
Of course any NI credits from childcare, voluntary contributions etc are not based on earnings and are therefore not WEP-able.
Last edited by jb82; Mar 9th 2015 at 8:21 am.
#623
Re: UK state pension and USA social security
I would love to agree with this and anyone who has actually convinced the SSA that this is the case would be most welcomed to chime in.
However you say the basic pension and the new uk pension are not related to earnings and that everyone gets the same no matter what they earn (and is therefore not wep-able). Yet in order to get the pension you have to have earned a certain amount from work to get the NI credit which the uk pension is based on. So they are both based on earnings they just do not vary by earnings.
So anyone claiming with the SSA that the uk pension should not be Wep-ed is most likely going to be disappointed at the best and at the worst in deep trouble with the SSA if they fail to disclose the full details.
Of course any NI credits from childcare, voluntary contributions etc are not based on earnings and are therefore not WEP-able.
However you say the basic pension and the new uk pension are not related to earnings and that everyone gets the same no matter what they earn (and is therefore not wep-able). Yet in order to get the pension you have to have earned a certain amount from work to get the NI credit which the uk pension is based on. So they are both based on earnings they just do not vary by earnings.
So anyone claiming with the SSA that the uk pension should not be Wep-ed is most likely going to be disappointed at the best and at the worst in deep trouble with the SSA if they fail to disclose the full details.
Of course any NI credits from childcare, voluntary contributions etc are not based on earnings and are therefore not WEP-able.
#624
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Re: UK state pension and USA social security
If it is not related to earnings what would you say it is related to? It has to be to something as you do not automatically get it. You don't get it by virtue of years of residence. Nor do you get it simply for being a citizen. Most people don't get it by voluntary contributions nor is the amount of contributions arbitrarily fixed per person (unless you are self employed and in which case you still have to earn over a limit).
#625
Re: UK state pension and USA social security
No that would mean it is not specifically size of earnings related. It is still related to earnings as you have to earn something to get the NI credit. It doesn't have to be a linear relationship to be related. If I earn under the lower earnings limit a year I don't get anything. If I earn more I do. Sounds like earnings is the key driver here.
If it is not related to earnings what would you say it is related to? It has to be to something as you do not automatically get it. You don't get it by virtue of years of residence. Nor do you get it simply for being a citizen. Most people don't get it by voluntary contributions nor is the amount of contributions arbitrarily fixed per person (unless you are self employed and in which case you still have to earn over a limit).
If it is not related to earnings what would you say it is related to? It has to be to something as you do not automatically get it. You don't get it by virtue of years of residence. Nor do you get it simply for being a citizen. Most people don't get it by voluntary contributions nor is the amount of contributions arbitrarily fixed per person (unless you are self employed and in which case you still have to earn over a limit).
b) Who said it had to be linear?
c) It's related to years of contributions. Say you earn £30k p.a. and pay in for 30 years; I earn £60k p.a. and pay in for 20 years. You get a higher pension, even though my earnings are higher.
#626
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Re: UK state pension and USA social security
Before April 6, 1975 they used a credit scheme based on Nics (stamps) paid. You, your employer, or anyone could pay your Nics for you, even at a post office. If you were unemployed, or unable to pay, you could apply for credits that would go on your record based on a means test.
After April 6, 1975, the NICS you paid in a tax year were recorded according to class and the amount you paid. You could also receive credits if you were unemployed and drawing the dole.
NICs could be collected over a 44 year expected work life, now changed to thirty years, but up to 35 next year.
I've been awaiting my WEP determination now for over a year having filled out SSA-308 in February 2014. My estimate of WEP depending on whether or not they take my pre-1975 credits into their calculations (I say they shouldn't of course) is an adjustment of between $12 and $175 per month plus pay back for the last twelve months. If I hear today!
Last edited by Eycott; Mar 9th 2015 at 8:38 pm.
#628
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Re: UK state pension and USA social security
I think nun is retired, just not old enough to apply for SS for another 9 pr 10 years. I also don't plan on applying for SS for another 10 years so I simply watch these discussions with interest.
#629
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Re: UK state pension and USA social security
You shot yourself in the foot. 'Say you earn'.... you just based it on earnings. Say I earn 2k for 50 years. I get nothing. Yet I contributed for longer than both your examples. So no it is not based solely on years of contributions. It is based on years of contributions that are based on earnings above a certain level. You have to earn something to get it. So it is based on earnings.
a) Yes you do. The ways you can get it without earning are exceptions to the rule and are excluded from WEP. EDIT Not sure about pre 1975.
b) Linear is the wrong word I simply meant you claim there has to be a direct relationship between size of pension and earnings. I am saying that it it can be based on earnings if you have to earn something to get it. What part of the legislation states the pension must vary by level of earnings? I believe it simply says based on non covered earnings which means ANY relationship to earnings.
c) You make contributions by earning! The exceptions are exceptions to the rule and don't fall under WEP anyway.
Last edited by jb82; Mar 9th 2015 at 8:59 pm.
#630
Re: UK state pension and USA social security