kodokan

Oh joy... *opens up community college website, and starts scouring the Course Catalog for suitable classes*

UK2US1979

<<£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...>>

Not correct. Maximum WEP is 50% of the additional pension that is subject to WEP. So, the amounts in this example would be $350 if the rate is USD 1.50.

On a different note, has anyone talked to the US SSA about the treatment of UK State Pension from the perspective of WEP? I believe, when start receiving, the UK state pension has to be declared to SSA whether it is subject to WEP or not. I guess they will decide that! Personally, I like nun's opinion on this subject..i.e: it is not subject to WEP. Would be nice!
So many people on this board. I am sure at least one or more of them who are receiving US SS, also receiving UK State pension. Like to hear what is their experience on SSA's position on WEP on basic UK state pension so far.

theOAP

As regards the WEP amount, you're right, the figure as stated is not correct for a WEP figure, but you get my drift. Actually, for 2015, Max WEP is $413 regardless of the exchange rate. It depends if the resulting amount is over or under $826. If over, Max WEP will be $413. If the amount is under, then the maximum WEP amount allowable will be 1/2 of the amount. So at 1.50, and $750, the maximum amount of WEP would be $375, not $350.

As regards SSA's opinion of the UK State pension when I applied for US SS, all the UK State pension was included, but then I had no voluntary contributions at class 2. The pension consisted entirely from class 1 contributions.

UK2US1979

< So at 1.50, and $750, the maximum amount of WEP would be $375, not $350.>

Sorry, artithmetical error. You are right abut $375

As to <As regards SSA's opinion of the UK State pension when I applied for US SS, all the UK State pension was included, but then I had no voluntary contributions at class 2. The pension consisted entirely from class 1 contributions>

So did the SSA treat the UK state pension subject to WEP as it did not relate to the voluntary contributions? i.e, your US pension was reduced by the WEP amount whatever it came to?
On a different note, I dont understand class1 and class 2 contributions.

UK2US1979

nun wrote <...There really are lots of arguments and ways to exclude UK state pension from WEP, just not private pensions where the contributions were made form non-SS earnings>

nun, what are the "ways" to exclude UK state pension from WEP. I am talking of regular state pension resulting from regular NHI contributions that were deducted from the payroll? I know you said earlier that one could argue that such contriburions might not be treated as earnings related and hence excluded from WEP.

dunroving

Class I are essentially what you pay if you are in regular employment. Class II (and Class III) are voluntary, and cover situations such as the self-employed and persons living and working overseas. It's all explained here.

I'll try to paraphrase what I read earlier and then someone can tell me whether I am talking bollocks. First rationale/method is for Class II (voluntary) NI contributions paid by working expats. The rationale is that these are paid for from US wages that were subject to US SS deductions.

The other rationale was for the basic UK state pension, the pension is not "earnings-related" (everyone gets the same, regardless of what their salary was). This aspect was what Nun, I think, brought up as not falling under the description of WEP-able non-SS pensions. Under the same logic the SERPS (state second pension) and the like would be WEP-able. Therefore, you'd need to figure out from your UK state pension forecast how much was for basic state pension and how much was from SERPS-related pension. Additionally, the point was made that the new flat-rate pension could also be defined as flat-rate (not earnings-related) and therefore WEP-exempt.

BTW, do you see the little "quote" box at the bottom left of each post? If you click on this to reply, you can include the original text. It is a bit difficult to follow your posts with your <quote method>

theOAP

The truth is, I really don't know. My UK works (company) pension was, on its own, far above the WEP amount.

When interviewed, I gave the UK State Pension amount first. The interviewer wanted to know all about it. It led to a brief period of me on a calculator, determining the amount. The UK State Pension is paid on a weekly amount. The SSA will only accept figures on a monthly amount (and it needs to be accurate down to the last pence). For example, SSA always deals only in a monthly amount, so the Max WEP amount for 2015 is $413, and that is the monthly amount.

Once I went on to give details of my company pension (down to the last monthly pence) the interviewer lost interest in anything else.

My impression was that the UK State Pension would have been a part of the WEP amount if my UK company pension had been significantly lower.

This was almost 6 years ago. Edit to add: the legal cases referred to earlier in this thread are much more recent, and therefore if you take a stance based on an interpretation of those cases relating to the WEP-ability of a UK State Pension, all the above is irrelevant.

kangoora

Hi Guys, I've read about 10 pages of this thread and my situation didn't seem to be there. I'm not expecting much (if any) good news but thought it was worth asking the question to see if anyone could advise.

I only worked in USA for 2 years (over 3 calendar years, August 99 to April 2001) and was earning $80k/year but I'm assuming I only built up 12 credits towards SS i.e. not enough to qualify.

I've built up enough UK NICs for a full pension (will be 40 years when I plan to retire) but was wondering if:

1. I could claim anything from the US SS system (I doubt that) for a pension.
2. If not, is there any way to get a refund of those contributions (somehow I doubt that also)
3. If anyone knows if my US SS contributions would qualify me for UK S2P or SSP credits, or do they just count towards basic NIC pension contributions. Obviously I'd need to provide proof to HMRC of these.

Any advice would be welcomed, or can I kiss goodbye to those 3 years contributions with no benefit achieved

I'm sort of resigned to it just being a waste of contribution as I won't need extra qualifying years to qualify for the UK pension.

theOAP

1. Yes, if your period of working is accurate (2 years full time employed and contributing to US SS via FICA).
2. No.
3. I don't know positively, but my guess is no.

To qualify for US SS you need 40 quarters of contributions. You have ~ 8. You need 32 more. The Totalisation Agreement allows you to use UK periods of contributions to 'make up for insufficient US SS quarters', but you must have a minimum of 6 quarters of contributions to US SS. Your 32 needed equates to 8 years worth of UK NICs. You have 40. You should be entitled to US SS, but the amount of benefit would only be based on those 8 quarters of your contributions. In addition, that amount may be WEPed additionally, reducing the amount even further.

Edit to add;
I should probably explain my thinking.

Your first quarter would be July, Aug., and Sept. of 1999. At $80k/yr, you should have the minimum required contributions for that quarter. You need to check the SSA for minimum contributions per quarter for 1999.

You have contributions for Oct., Nov., and Dec. of 1999. That equals 1 quarter.

You have contributions for all of 2000. That equals 4 quarters.

You have contributions for Jan., Feb., and Mar. of 2001. That equals 1 quarter.

You have contributions for April of 2001. Depending on the minimum quarterly contributions required for 2001, you may have 1 quarter.

You have 6 quarters at least, more than likely 7, and possibly 8 if Apr. contributions were above the minimum required for the entire quarter for 2001.

If you have a record of your contributions, there is a calculator available on the SSA site. If it allows the use of the Totalisation Agreement, you will be able to work out your situation.

kodokan

<interested>

So if kangoora has 40 years of NICS, are you saying s/he can elect to use 8 of them to bring the US SS up to the required 10 (assuming 2 already)? And then get a UK pension based on 32 rather than 35 years?

Or kiss off the 2 years of SS as just being one of those things, like paying 40 years into NI when you only need 35.

Presumably then it's just a case of running the calcs to see which one scenario generates the most money: UK pension for 35 years credit; or UK for 32 plus US for 10 (taking into account WEP, and that the additional years are just an entry ticket rather than being factored into the payout calculation).

I hadn't thought about the possibility of using the Totalisation Agreement like this. I thought it was just for people who had split contributions and didn't qualify anywhere, like if you perhaps had 8 years in both UK and US, and want to combine them into 16 in one system alone.

theOAP

Where to start?

Rule#1: Actual years of contributions do not go from one system to the other. If s/he has 35 years of contributions to the UK, they will always have 35 years in the UK even if they use the Totalisation Agreement. Nothing changes regards their UK State pension.

What does change is the US SS benefit. As it is, with 7 or 8 quarters of contributions, they will have no US SS benefits. After using the Totalisation Agreement, they will have 7 or 8 quarters worth of US SS benefits,....only. The years from the UK are not transferred to US SS, or taken away from the UK SP benefits; they are only used to meet the needs and requirements of the Totalisation Agreement.

The US SS benefit will be small, even on earnings of $80k/year. It will only be calculated on the contributions made during those 8 quarters, and will likely be WEPed as well. It will NOT be for 40 quarters (or ten years) of contributions.

It does not matter that they will have a full UK SP. The Agreement only prevents those who have contributed for at least 6 quarters in the US, or 18 months in the UK, from losing the benefit. There are only a few countries that have an Agreement with the US, and the UK is one of them. In the EU, it's more common to have this type of arrangement between countries.

The SSA website has all the details on the Agreement, but it is not the clearest wording ever written. Search for US UK Totalisation Agreement. It may be "Totalization" on the SSA site.

kodokan

Thank you - I shall have to look into this a bit more to see if it's of use to me.

For example, I currently have 19 years of UK NI credits, and no SS credits as I've not worked here. I may start working here in the future, once the kids are a bit bigger, but have been a teeny bit deterred by the thought of paying SS contributions for which I'll see no benefit, as I have no plan whatsoever to hit the 10 years' working mark (hubby and I are working on an early retirement strategy for him).

But from how you explain it above, perhaps I could work for, say, 6 years. I'd then use the Totalisation Agreement to add 4 more years from my UK credits, which would round me up to the required 10, but the actual SS I received would be based on just the 6 years of actual contributions. Meanwhile, I still have 19 years in the UK system. Is that how it works..?

Does it work the other way round, do you know? Could I take my mythical 6 years of US SS credits that's not enough to qualify for a US pension, add them to my 19 UK NI ones, and get a UK pension that's the equivalent to 25 years? Because if so, it would be worth me getting a small job that earns just enough to qualify for credits for the SS quarters - it'd be cheaper than paying voluntary Class 3 contributions!

But I think the Totalisation Agreement is just to boost the contribution years for people to qualify for a certain country's system, not to switch low-paid years from the US where they'd be worth buttons, to the UK where they'd be worth a whole lot more.

theOAP

Yes.


NO! Remember Rule#1 - Actual years or quarters of contributions to one country can not be transferred to the other country. UK contributions (years) can not be transferred to the US to increase US SS; and US SS contributions (quarters) can not be transferred to the UK to increase the UK State Pension. The Totalisation Agreement is only a mechanism to allow a non-qualifying pension to become a qualified pension.

It does work for the UK if you have, for example 19 years (76 quarters) of US SS contributions, but only 6 years of UK State Pension contributions under the New State Pension rules. (Under the new rules, you need 10 years of qualifying contributions to receive a pension. See 2, Eligibility on: https://www.gov.uk/new-state-pension/eligibility ) Using the Agreement, you would then qualify for a UK State Pension, even though you don't have the 10 years of contributions required. But, the amount of the UK pension would only be based on the 6 years of contributions.



YES, I think you've got it!


There are some who may not be helped by the Totalisation Agreement. For example, someone with 4 years of maximum US SS contributions (16 quarters) and 4 years of UK State Pension contributions will not qualify for a pension in either country. 4(16) US + 4 UK = 8 UK (32 US), which is less than the 10 UK (40 US) required for either system in order to qualify.

The UK side of the Agreement(s) is explained here for the new UK State Pension rules:
https://www.gov.uk/new-state-pension...rking-overseas


"However, you may be able to use your time abroad to make up the 10 qualifying years needed to get any new State Pension. This is most likely if you’ve lived or worked in:

• the European Economic Area (EEA)
• Switzerland
• certain countries that have a social security agreement with the UK"

("certain countries" includes the US)

theOAP

"QUARTERS" VERSUS "CREDITS"

Pre-1978, US SS contributions were reported by an employer every 3 months (or "quarter"). Starting in 1978, US SS contributions are reported by an employer only once a year. This gave rise to the term "credits".

Pre-1978
If you earned a minimum of $50 in a 3 month calendar quarter, you received 1 quarter of coverage, no matter when during the quarter the work was done.

1978 onwards
Credits are earned based on the total income earned in a year (01 Jan. to 31 Dec.), no matter when during the year the work was done. There is a minimum amount of earnings required to earn 1 credit. There is also a minimum amount of earnings required to earn 4 credits (maximum amount). It does not matter if your earnings are above the maximum (or far, far above the maximum), you will still only receive the maximum 4 credits for the year. You may never have more than 4 credits in any one year.

In effect, this made it easier to earn 4 credits during a year than the previous requirements for earning 4 quarters during a year. Someone can work for only 3 months during the year, and if their earnings are high enough, earn the maximum amount for 4 credits for the year. Pre-1978, the person would only have received 1 quarter for the year. That, in turn, means it may now be easier for an individual with a sporadic work record to build up the required 40 quarters/credits to qualify for US SS.

Amounts earned between the minimum and maximum amounts for the year will result in 1, 2, or 3 credits.

NOTE: There are special rules for military, domestic work, self-employed, church work, election work, and farm workers, for example.

2014 and 2015
For 2014, the minimum amount required to earn 1 credit was $1,200. The amount required to earn the maximum 4 credits was $4,800.

For 2015, the minimum amount required to earn 1 credit will be $1,220. The amount required to earn the maximum 4 credits will be $4,880.

The information above is for determining the number of quarters/credits available on your record only.
How your actual SS benefit will be calculated depends on a number of other factors (maximum earnings allowed for year, actual earnings, index factor, indexed earnings, etc.)

As with most things today, it's easier to go to the Social Security Administration website, and use the calculators to determine your SS benefits. As I understand it, you may download your record of contributions (and quarters/credits earned). It is always useful if you keep a record of what you think your contributions are, via a payslip.

WHAT I DON'T KNOW ABOUT THE ABOVE (AMONGST MANY OTHER THINGS):
For 2015, is the minimum amount required for a credit ($1,220) your net salary in the year, or is $1,220 the 6.2% SS contribution (covered earnings???) calculated from your net salary for the year?

Quarter of Coverage (Note the use of "quarters" terminology for post-1978 earnings. Unsurprisingly, the SSA is not consistent.)

Benefits Planner: How Credits Are Earned

WEBlue

That's something of a polite understatement!

Many thinks to you, OAP, for the translation of the Totalization Agreement that you've provided in these posts you've made. They've helped me a lot in my understanding of this issue, as have many of your previous posts on SS/pensions. Like Kodokan, I think I'm 'getting it' at last.....