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UK state pension and USA social security

UK state pension and USA social security

Old Feb 6th 2013, 9:08 pm
  #61  
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Default Re: UK state pension and USA social security

Originally Posted by Mallory View Post
I met my husband when he was in the Air Force in Germany. When we got back to the US he got a full-time job, and went to college on the GI bill. When he was finished I worked full-time, went to college, and paid for it out of my own pocket. We had 2 children by that time.

If we had not worked we would have had zero social security years while we were at college. I would not have expected the government to give us free social security years if we had decided not to work.
Maybe you were responding to another of my posts? (I didn't discuss SS in this post).

Anyway, to respond to your point, the GI Bill was a pretty nice "handout" from the US government - so a free education is OK but free SS (or UK NICs) is not?

I'm not criticising you for your life decisions (some vets gave plenty, so there should be some "payback" - though I was always surprised at how many perks there are in the US for "vets", many of whom worked a desk job and never set foot on foreign soil ...). I'm just raising the question of why is expecting or accepting one government freebie any different than expecting another? I'm not questioning the fact of the rules, but the fairness or consistency.

If I was pursuing a lucrative career then maybe that would counterbalance a lower state pension, but that isn't the case. I pursued a post-secondary (and postgraduate) education primarily to be a better contributor to society (sounds corny, but there you go). What do I get in return for my self-funded education? A lower state pension.

On the subject of life choices, isn't staying at home to raise children also a life choice? Last time I checked, child care years are eligible for UK NICs credits, and for maternity pay from the government. I don't see why that should be different than any other decision to take yourself away from the workforce. Is pursuing an education a somehow less worthy pursuit than having babies?

All just points for discussion, not any comment about you or anyone else on this board. As you can possibly tell, I'm a bit disillusioned at a few things I have learned recently.
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Old Feb 6th 2013, 9:14 pm
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Default Re: UK state pension and USA social security

Yes, just a friendly discussion. I just think about those 15-year-old kids that went to work in factories while you were at uni. You got an education and grants off their taxes. They got paid up NIC years. It just seems fair to me.
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Old Feb 6th 2013, 9:17 pm
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
Hmm, I am not so sure. I think of it more as a "generally accepted truth", that is based on "stuff we are told".

Consider the following:

A fact is something that is immutable or undeniable. I don't think that applies at all.

There is a body of evidence that appears to support the assumption that a university education means higher lifetime earnings. However, like most quantitative evidence, it is based on average patterns. So, as I said previously, some degrees (law, medicine, finance) are associated with (considerably) higher salaries. However, these are balanced out by people with degrees in music, media studies, psychology, etc. Even vocational degrees like nursing and social work don't lead to particularly high salaries.

This body of evidence is generated by people with a vested interest in promoting a university education, namely researchers who work in universities.

Simple comparsons of people with and without a university education ignore the elephant in the room, namely the fact that university students are generally smarter, from better homes, with richer parents, etc. So is their higher lifetime salary (on average) due to a university education, or these other factors?

I would suggest that if you compared two people with similar intelligence, home background, etc., the one who entered the market earlier, got promoted earlier, learned "job skills" and "life skills" rather than "book learning", had more years of earning, might well be much better off.

Just something to consider: After earning a PhD and gaining a university job as a senior lecturer, my salary was no higher than a teacher who had been in the profession earning money during my time at university, and progressed up the salary ladder. My professional pension will be lower, and kick in 5 years later, than my undergraduate peers. I drive a lower standard car, take fewer holidays and eat out much less than most of my neighbours - and most of them don't have an undergraduate education, never mind a postgraduate degree.

No, on an anecdotal and empirical basis I just don't accept this "well established fact"
Neither do I. In fact it's often the complete opposite, as you say. My brother doesn't even have A-levels but seems to do well in IT. He refuses to do anything in life for which he's not paid, whereas graduates are often burdened by finer feelings about vocation, contribution to society etc.
Originally Posted by dunroving View Post
Maybe you were responding to another of my posts? (I didn't discuss SS in this post).

Anyway, to respond to your point, the GI Bill was a pretty nice "handout" from the US government - so a free education is OK but free SS (or UK NICs) is not?

I'm not criticising you for your life decisions (some vets gave plenty, so there should be some "payback" - though I was always surprised at how many perks there are in the US for "vets", many of whom worked a desk job and never set foot on foreign soil ...)
Yes I'm also surprised by the perks available. Also the recipients are generally opposed to the rest of society getting anything similar.
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Old Feb 6th 2013, 9:18 pm
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Default Re: UK state pension and USA social security

Originally Posted by Mallory View Post
Yes, just a friendly discussion. I just think about those 15-year-old kids that went to work in factories while you were at uni. You got an education and grants off their taxes. They got paid up NIC years. It just seems fair to me.
My Dad got an apprenticeship at 15, but why was this harder than working at a degree? And he therefore had a full 40 years of occupational pension service by age 55 and could retire and mess about on boats.
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Old Feb 6th 2013, 9:43 pm
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Default Re: UK state pension and USA social security

Originally Posted by Sally Redux View Post
My Dad got an apprenticeship at 15, but why was this harder than working at a degree? And he therefore had a full 40 years of occupational pension service by age 55 and could retire and mess about on boats.
Dunrovin could have got an apprenticeship and retired at 55. It's all about choice.
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Old Feb 6th 2013, 9:44 pm
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Default Re: UK state pension and USA social security

Originally Posted by Mallory View Post
Yes, just a friendly discussion. I just think about those 15-year-old kids that went to work in factories while you were at uni. You got an education and grants off their taxes. They got paid up NIC years. It just seems fair to me.
Actually, I began working from 15 years, at the same time as going to (secondary) school. I was only a paper boy at that age, but as soon as I was old enough (16) I was working weekends in retail. I worked a year full-time before going to university, and took a year off to work full-time between third and fourth year. I also worked evenings and weekends while I was at university - I wasn't just swanning around reading books by a leafy river bank, indulging my intellectual curiosity. I'm eager to see my NIC record (I requested it a few weeks ago, still waiting), as my NIC history doesn't seem to add up (literally).

I've said this before, but there is often an assumption about people who go to university, work in a profession, manage to save up money for retirement. Something to do with being rich, or toffs, or not deserving of what they get. I find this as pernicious as labelling all recipients of benefits as being lazy good-for-nothings.

I keep coming back to the same point - I don't see these poor 15-year olds you refer to as being worse off than me today, in fact quite the opposite.

Also, my current taxes are paying for plenty of other people's "stuff" - babies (NIC credits, schools, maternity pay, child tax credits), miscellaneous benefits, etc., etc. All of these people get NIC credits ...
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Old Feb 6th 2013, 9:48 pm
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Default Re: UK state pension and USA social security

Originally Posted by Mallory View Post
Dunrovin could have got an apprenticeship and retired at 55. It's all about choice.
Unlike today (when all of the necessary information is available at the click of a mouse), back then the implications were not obvious. If I had known back then that not bothering to work hard at O-levels, A-levels, a degree etc. would have allowed me to retire at 55, I might have taken that choice.

Last edited by dunroving; Feb 6th 2013 at 9:57 pm.
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Old Feb 6th 2013, 10:23 pm
  #68  
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Post Re: UK state pension and USA social security

You can't think like that though, Dunroving, can you.
We all make our choices based on info we have at the time, and none of us know where we might end up with different choices.

You compared yourself to contemporaries that might appear to be better off than you financially, but they may not have had the benefit of the experiences you have had during your stints abroad. You don't know, they may feel jealous of the opportunities you have had in life.


I am at the tail end of the baby boomer generation - born in 63. I see women my age or just a little older planning/experiencing retirement with their husbands. However, I have scuppered my chances of probably ever doing that by marrying a younger man! My husband is in his early forties, never had the luxury of a defined benefit pension scheme and is unlikely ever to draw a state pension before he is 70!

I wouldn't change that choice for anything though
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Old Feb 6th 2013, 10:46 pm
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Default Re: UK state pension and USA social security

Originally Posted by rebs View Post
You can't think like that though, Dunroving, can you.
We all make our choices based on info we have at the time, and none of us know where we might end up with different choices.

You compared yourself to contemporaries that might appear to be better off than you financially, but they may not have had the benefit of the experiences you have had during your stints abroad. You don't know, they may feel jealous of the opportunities you have had in life.


I am at the tail end of the baby boomer generation - born in 63. I see women my age or just a little older planning/experiencing retirement with their husbands. However, I have scuppered my chances of probably ever doing that by marrying a younger man! My husband is in his early forties, never had the luxury of a defined benefit pension scheme and is unlikely ever to draw a state pension before he is 70!

I wouldn't change that choice for anything though
Very true - you can't reduce it all to pounds, shillings and pence.

However, there are some anomalies like WEP which I had no idea about before moving here.
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Old Feb 6th 2013, 10:50 pm
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Default Re: UK state pension and USA social security

Originally Posted by rebs View Post
You can't think like that though, Dunroving, can you.
We all make our choices based on info we have at the time, and none of us know where we might end up with different choices.

You compared yourself to contemporaries that might appear to be better off than you financially, but they may not have had the benefit of the experiences you have had during your stints abroad. You don't know, they may feel jealous of the opportunities you have had in life.


I am at the tail end of the baby boomer generation - born in 63. I see women my age or just a little older planning/experiencing retirement with their husbands. However, I have scuppered my chances of probably ever doing that by marrying a younger man! My husband is in his early forties, never had the luxury of a defined benefit pension scheme and is unlikely ever to draw a state pension before he is 70!

I wouldn't change that choice for anything though
I think I'd swap my SS entitlement for a younger woman.
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Old Feb 6th 2013, 11:33 pm
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Default Re: UK state pension and USA social security

Have just been reading some of the threads on the visa forum from people who "chose" to marry non UK citizens and are now realising they may not be able to live in the UK. I wonder if they would agree that it's all about choice ...
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Old Feb 7th 2013, 10:56 am
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Default Re: UK state pension and USA social security

OK, now I've slept on it and (somewhat) accepted my growing realisation that my "state" pension (UK and US) will be greatly reduced from what it could (or should) be, I still have some very practical questions that probably apply to anyone who has a US SS history and a UK NI history:

Is it possible to be WEP'd for 100% of your US SS pension? Two of the criteria I presented earlier seem to indicate it's possible, but surely after paying 10 years as a full-time worker into a retirement system, you must get something in retirement?

Practically speaking, how does the UK system know you have a US SS history and how does the US SS system know you have a UK NIC history?

Has anyone in this situation (with fewer than 30 years US SS) started taking US SS pension and UK NI pension? If so, how does it all work in practice? I think I read in one of the UK .gov pages that if you are eligible for transfer under the Totalisation Agreement (yes, yes, I know I don't fall under that cetgory), you just tell HMRC (or whoever) that you have a US SS history and they contact US SS and sort out whatever you are eligible for transferring (or not, of course). When you request US SS pension to start, is there a similar question you have to answer, about receiving a non-SS pension (so you will get WEP'd?). Do they then contact the other agency, or do you self-declare your non-USS pension earnings (like a self-report tax return)?

Also, presumably there is a form you fill in to declare non-residence for US tax purposes, receive US SS pension gross of tax and then file a self-assessment in the UK (presuming you are resident in the UK, I mean)?

Although my US SS pension will be reduced by 72% [edit: Whoops, I should have said reduced to 72%] if I start taking it early (at 62), I'm thinking it might be worth taking it WEP-free for a few years at least, until I start taking UK pension at 66 (or even later, if I defer it). I suggested this once in the US forum and was warned about the fact it (US SS pension) will be reduced over what I'd get at 66 but it seems better to at least get something for a few years before I get WEP'd to Hell and back. I would then (when I start drawing UK pension at 66 or whenever) self-declare this to US SS and they would then take out the WEP-gun.

I'm assuming that is how it would work, but I know where assumptions get us in this grey area.

[I just ran a simple spreadsheet - text version pasted below - and even if I wasn't getting WEP'd, taking 72% of US SS pension from 62 years, the "break-even" point where the sum of my SS income for retirng at 66 exceeds the same thing if I started at 62 is about 76 years of age. Men in my family generally don't get close to 70, so I'm thinking it's a better bet. Obviously there are atxes and inflation to consider but I figure this is a pretty accurate picture, as I am increasingly thinking of retiring at 62 whatever my income, so my income taxes will be relatively low].

Age Early (72%) Late (100%)
62 0.72 0
63 1.44 0
64 2.16 0
65 2.88 0
66 3.60 1.0
67 4.32 2.0
68 5.04 3.0
69 5.76 4.0
70 6.48 5.0
71 7.20 6.0
72 7.92 7.0
73 8.64 8.0
74 9.36 9.0
75 10.08 10.0
76 10.80 11.0
77 11.52 12.0

Last edited by dunroving; Feb 7th 2013 at 12:19 pm. Reason: Added nore information
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Old Feb 7th 2013, 12:48 pm
  #73  
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post

Is it possible to be WEP'd for 100% of your US SS pension? Two of the criteria I presented earlier seem to indicate it's possible, but surely after paying 10 years as a full-time worker into a retirement system, you must get something in retirement?
While benefits are lower when using the modified WEP formula, they are never totally eliminated. The maximum reduction under the WEP formula for 2012 is normally $383.50 per month.

However, under a special rule the reduction can be less. This special rule limits the reduction under the WEP to no more than one-half of the amount of the pension from employment that is not covered by Social Security. For example, if the person's pension is $500 per month, the WEP reduction could not exceed $250.

Practically speaking, how does the UK system know you have a US SS history and how does the US SS system know you have a UK NIC history?
you tell them

When you request US SS pension to start, is there a similar question you have to answer, about receiving a non-SS pension (so you will get WEP'd?). Do they then contact the other agency, or do you self-declare your non-USS pension earnings (like a self-report tax return)?
The SSA certainly asked about non-SS pensions when you apply for SS. You can also get certificates of coverage to show your SS benefits, but I don't know if the UK and UK agencies communicate directly.

Also, presumably there is a form you fill in to declare non-residence for US tax purposes, receive US SS pension gross of tax and then file a self-assessment in the UK (presuming you are resident in the UK, I mean)?
US SS checks do not have state or federal tax withheld unless you specifically request it, so you will receive it gross without doing anything.
If you are a NRA and the SS is your only US income you will have no US tax liability. You usually send a W-8BEN to the payer of a US retirement benefit if you are a NRA to make sure there is no withholding tax and claim a tax treaty benefit. I suppose you could send one to SSA as well.

If you are a US citizen resident in the UK, under the treaty SS is not US taxable so you don't need to include it on your 1040. You can file an 8833 tax treaty claim to claim that exemption, but it's not strictly necessary. [/quote]

Although my US SS pension will be reduced by 72% [edit: Whoops, I should have said reduced to 72%] if I start taking it early (at 62), I'm thinking it might be worth taking it WEP-free for a few years at least, until I start taking UK pension at 66 (or even later, if I defer it). I suggested this once in the US forum and was warned about the fact it (US SS pension) will be reduced over what I'd get at 66 but it seems better to at least get something for a few years before I get WEP'd to Hell and back. I would then (when I start drawing UK pension at 66 or whenever) self-declare this to US SS and they would then take out the WEP-gun.
You need to run the numbers and make sone assumptions about life expectancy to come up with the optimum combination of deferral and WEP.
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Old Feb 7th 2013, 1:00 pm
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
While benefits are lower when using the modified WEP formula, they are never totally eliminated. The maximum reduction under the WEP formula for 2012 is normally $383.50 per month.

However, under a special rule the reduction can be less. This special rule limits the reduction under the WEP to no more than one-half of the amount of the pension from employment that is not covered by Social Security. For example, if the person's pension is $500 per month, the WEP reduction could not exceed $250.



you tell them



The SSA certainly asked about non-SS pensions when you apply for SS. You can also get certificates of coverage to show your SS benefits, but I don't know if the UK and UK agencies communicate directly.



US SS checks do not have state or federal tax withheld unless you specifically request it, so you will receive it gross without doing anything.
If you are a NRA and the SS is your only US income you will have no US tax liability. You usually send a W-8BEN to the payer of a US retirement benefit if you are a NRA to make sure there is no withholding tax and claim a tax treaty benefit. I suppose you could send one to SSA as well.

If you are a US citizen resident in the UK, under the treaty SS is not US taxable so you don't need to include it on your 1040. You can file an 8833 tax treaty claim to claim that exemption, but it's not strictly necessary.



You need to run the numbers and make sone assumptions about life expectancy to come up with the optimum combination of deferral and WEP.
Thanks, Nun - I have started pasting some of these posts in a file called BE tax and pension posts, but I think maybe I shold rename it "Nun's advice" (with all the legal caveats that you are not a professional tax advisor, and your advice does not constitute legally binding, etc., etc.).

The two examples you used at the top link with my Criterion 1 and 2 in an earlier post. Here is my concern: In your two examples, if my US SS pension entitlement is, say $250 a month, both "maximum reduction" amounts are greater than that, hence my worry I could get WEP'd 100% (of my US SS entitlement).

That estmate of $250/month isn't far off some of the projections I have got from the online calculator - though as I mentioned previously, I can't get an updated SS satement because I am not in the country and the Web site section about updating your address only accepts a UK address - it's a Catch-22 situation. They just say get back in touch with us when you are preparing to retire.

So, if your US SS pension entitlement is less than the "maximum amount" for WEP reduction in the year you retire, and is also less than 50% of your UK state pension, you could get WEP'd completely ... correct? Or am I still missing something?
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Old Feb 7th 2013, 1:15 pm
  #75  
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
That estmate of $250/month isn't far off some of the projections I have got from the online calculator - though as I mentioned previously, I can't get an updated SS satement because I am not in the country and the Web site section about updating your address only accepts a UK address - it's a Catch-22 situation. They just say get back in touch with us when you are preparing to retire.

So, if your US SS pension entitlement is less than the "maximum amount" for WEP reduction in the year you retire, and is also less than 50% of your UK state pension, you could get WEP'd completely ... correct? Or am I still missing something?
When I get into questions like this I stop trying to do the calculations myself and go to the SSA WEP calculator

http://www.ssa.gov/retire2/anyPiaWepjs04.htm

Enter your numbers with and without the non-SS pension and you'll see how much you can be WEPed, but I think it's safe to say WEP cannot remove all your SS.
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