Giantaxe

I believe Lansbury is incorrect and that even if you qualify for US SS you can use those credits to help you qualify for a UK pension (and vice versa).

UK2US1979

Giantaxe, this is how I read it. If correct, this would help my brother. But certainly like to know why lansbury is of a different opinion. He is well read and has a good knowledge of UK pension. So is nun. Wonder what nun's opinion is.

UK2US1979

lansbbury, do you remember where you read that?
If correct, since my brother has already been claiming the US SS, that might not help him towards UK pension, even if he could have used the credits merely to help qualify for the Uk Pension.

lansbury

I used to believe as you did, that you even if you qualified for one pension you could still "transfer" credits to the other to qualify in that one. I was told on BE some time ago that was wrong and hence my comment above. It is correct the credits do not actually get moved from one pension to the other. If I am wrong happy to put my hands up to that but it goes against the advice I was given here.

My wife's original UK State pension was based on 12 years, and her SS based on 27 years. We tried to use the UK pension to get a full SS pension but were not able to do so.

Giantaxe

Right, because she already qualified for both based on her contribution record. You can only use credits from one to qualify for the other if you don't otherwise do so.

UK2US1979

Here are my thoughts on this, lansbury. The situation with your wife was apparently different. She did not need any credits from either country to "qualify" for the pension in both countries. She already had met the minimum years/credits required in both countries. You then tried to use her UK credits to get her US pension increased to full amount. That cannot be done. Just as I cannot use my US Credits to get my UK Pension increased. You might recall, I am only getting a portion of the full UK pension because I have only 11 years in the UK which already meet the minimum years/credits required for the UK Pension and did not need the US credits to help qualify.

So, using the Credits for purposes of meeting the minimum years/credits required in either and/or both countries is different from trying to use those credits to improve/increase your pension in either/both country.

What would be your thoughts upon reading the Totalization Agreement paragraphs I mentioned in my earlier post?

lansbury

I would like to think your interpretation is correct, and as I said above that was how I thought it worked until told I was wrong. I can't recall anyone posting on BE who has done this so the exact mechanics of how it works lacks knowledge based on experience.

Originally my wife's pension was going to be based on 9 years and that is why we started looking into using it to top up the SS. When told that wasn't possible as she qualified for SS, we considered buying some extra years which we did. We did then try to use it to top up the SS but as I said that got knocked back as well.

UK2US1979

Lansbury, your input is always welcome and gives us a chance to explore further. Just trying to understand whether ( with 9 years) your wife was initially short of a year or two to meet the minimum years required to qualify for the UK Pension or she bought a few more years merely to improve her state pension. . I take it, she bought the additional 3 yrs purely for purposes of upping/improving her pension as opposed to meeting the minimum. In other words, DWP did not tell her that with 9 years, she did not qualify for the UK Pension And that she could not use her US credits towards the minimum years required in UK because she qualified for the US SS?

lansbury

In those days the minimum needed to get a pension was 10 years contributions, and she was one year short. That information was from DWP and she was told she could purchase additional years. Not sure now how we arrived at 3 years being the best for her to buy, but I know the fact that when I retired she would get 60% of my pension figured into it. Effectively we were getting her a pension for those intervening few years so not much time to recoup the extra buy in. We did all this while still in the UK, so some time ago now, hence the old memory is a bit vague especially as Mrs L was the one dealing with DWP.

My idea was to use her UK pension to top up her SS but in one of the many pension threads we have had on BE over the years I was told that as she qualified for a SS pension that couldn't be done. Now I will admit that as the advice given on BE was from more than one person I didn't do as I normally would double check it from another source. A bit stupid in hindsight. At no time did DWP suggest using her SS record to top up her UK contributions.

alanroberts50

As a 22 year green card resident formerly of UK birth I have read with great interest about WEP which I did not even know about until this forum. Thank you for letting me know I will be getting less US SS than I thought!

I am about to get a private pension lump sum in a couple of years from a UK pension company and realized that it appears better to just leave it there to maturity. Now here is a question.... Here in the US If I close out a pension fund such as a 401k I can reinvest the funds within 90 days I think and not pay taxes/penalties etc. So when my UK private pension fund matures can I reinvest the whole amount here in a US pension fund within 90 days, defer taking the money and not pay US taxes on the lump sum until I start taking money out? (I am already UK tax exempt due to the double taxation treaty)

I have a follow up question regarding the double taxation treaty which I will post separately...
Thanks for any input,
Alan

Neillc37

No. Only qualified retirement accounts in the US can be rolled over. The is a private letter ruling from the IRS saying this if you look for it.

nun

No. It is not possible to move funds from a UK pension plan to a US retirement plan.

nun

If you take this UK pension lump sum in a single amount there won't be any UK tax due as long as you make the correct treaty claim, but it will be fully taxable as income in the US.

UK2US1979

The advice BE member gave about the top up of SS pension with the use of UK credits would appear to be accurate because she was already qualified for the SS pension on her own contributions to the system here. Hence could not have used her UK credits for the purpose you/she had in mind.

As to the UK, minimum required for myself ( men ) was also 10 years. I thought for women, UK required a bit lesser credits/years. So, it is interesting that at 9 years, she was short by 1 year. That does change the entire picture a bit. If she already had US credits also and if my interpretation were accurate, she could have used 1 year of her US credits to meet the minimum requirements for UK purposes. But you are saying that DWP did not suggest that. Could it be that they didn't suggest it because she was going to buy some extra years in UK anyway and/or the claim for UK pension had not yet been filed ?

If and when I learn of DWP treatment of US credits towards my brother's minimum years requirement, I would let you know. As I mentioned earlier, their letter said something to the effect that they were contacting their US counterpart to see if his pension could be "improved". Whatever that means!

Neillc37

I'll reopen this can of worms. While I was on board with this interpretation before as well as the possibility of using periodic payment to get the tax free element I was confused by this:

http://intltax.typepad.com/894_pension_taxation_uk.pdf

Here the tax free element is said to be preserved for both lump sum and periodic. I set about trying to understand how you might reason this way.

Article 1(4):
Article 1(5):
So this suggests to me you read the tax treaty ignoring the saving clause to see what you might be granted. Then you preserve only that granted by stuff that withstands the saving clause.

Article 17(1):
So only the US can tax the pension but irrespective of this the US can't tax anything was wasn't taxed in the UK if a resident there. The 'notwithstanding' here keeps b) there even though it doesn't make sense in this case.

Now Article 17(2):

In spite of what it said in 17(1) the UK can tax the lump sum. This didn't say that the US can tax all of it though so 1 b) remains active. This is backed up by the technical explanation:

The saving clause overrides the general rule which is 17(1)(a). Leaving b) alone.

So now we leave only those bits in place that were exempted from the saving clause: