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UK state pension and USA social security

UK state pension and USA social security

Old Feb 7th 2013, 12:32 pm
  #76  
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
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.
Thanks, Nun. I had already used it a couple of times, but the main problem is I don't know the correct amounts to enter (because I can't find any of my SS statements, and I can't get replacements or an updated statement because of being a NRA). Once I get my UK NIC statement, at least I will know how much to put in as the amount for the non-SS pension.

When I guesstimated this stuff, it didn't give me a big fat zero, so I am hoping you and I are correct (in our assumption that you shouldn't be completely WEP'd out). I hadn't thought about running it with and without the non-SS amount ... duh. At least this would confirm it was doing some WEP-ing.

Thanks, appreciate your advice as always. I think I owe you a beer or two sometime.

[Later edit: I just ran the calculator using some rough numbers, being conservative about my US salaries. It looks like I am WEP'd by about 43%. This is consistent regardless of whether I take US SS at 66 or any time earlier. So it looks increasingly that it makes sense to take it from 62, WEP-free until 66 (or later if I postpone my UK state pension beyond 66 ...). Must say these online calcuators are very useful. I have used one for my current employer pension and it helps immensely not to have to wriite a letter to someone every time you want a projection.]

Until last year I was assuming I would grind on until I was 66, but am increasingly considering my options (of retiring earlier, or semi-retirement). I don't mind accepting a lower income as long as I am not stuck inthe house eating macaroni cheese, which I was worried would be my only option.

Must say I do like the fact that US SS pension is determined by not just how long you paid in but how much you paid in ... that is one aspect of the social benefit system that the US has got right above the UK.

Last edited by dunroving; Feb 7th 2013 at 1:06 pm.
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Old Feb 7th 2013, 2:42 pm
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post

Until last year I was assuming I would grind on until I was 66, but am increasingly considering my options (of retiring earlier, or semi-retirement). I don't mind accepting a lower income as long as I am not stuck inthe house eating macaroni cheese, which I was worried would be my only option.

Must say I do like the fact that US SS pension is determined by not just how long you paid in but how much you paid in ... that is one aspect of the social benefit system that the US has got right above the UK.
If you can roughly remember your earnings history the WEP calculator can give you a good estimate.

The UK state pension still has the second state pension that is earnings related, but under the new reforms that will disappear and only the number of contributions will be used to calculate the pension. Whether you think that's appropriate depends on how you view the state retirement benefit; as providing a basic income for everyone or as an earnings related pension. NEST will provide everyone with earnings related retirement savings and I personally like that under the new pension rules people on low incomes will get a bigger pension. It's also good for all those that have only paid voluntary NICs as their basic pension will rise from 107GBP to 144GBP a week.
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Old Feb 7th 2013, 3:11 pm
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
If you can roughly remember your earnings history the WEP calculator can give you a good estimate.

The UK state pension still has the second state pension that is earnings related, but under the new reforms that will disappear and only the number of contributions will be used to calculate the pension. Whether you think that's appropriate depends on how you view the state retirement benefit; as providing a basic income for everyone or as an earnings related pension. NEST will provide everyone with earnings related retirement savings and I personally like that under the new pension rules people on low incomes will get a bigger pension. It's also good for all those that have only paid voluntary NICs as their basic pension will rise from 107GBP to 144GBP a week.
Yes, I increasingly am coming around to appreciating the simplicity of decent minimum universal benefits, and using the tax system to claw back from people who don't necessarily need everything that is going.

This latest change in child benefit (child tax credit, maybe?) seems daft, because it involves means-testing, or tax-assessing people (not a cheap exercise in itself, though it keeps civil servants in work, I suppose), and households with 2 x £49,000 salaries receives it but a household on 1 x £50,000 salary does not ... it seems that taxation would be a simpler way of solvng this conundrum.

Same with old age benefits like the fuel allowance and TV license - tax those who don't "need" it rather than the more complicated procedure of determining who needs it and how much those who don't entirely qualify should get as a reduced benefit ... having said that, I am sure these will both go out of the window for people who are on the newer, higher universal pension (quite right too, probably).

Yes, voluntary NICs credits for people overseas is money for nothing (or close to it).
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Old Feb 7th 2013, 4:11 pm
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
............

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)?
I can partly answer your questions about US SS and UK pensions by relating some our our (her indoors) experiences.

If you are in UK (or anywhere else outside US) then you initiate your US SS through your local US Embassy.
http://london.usembassy.gov/cons_new...u_contact.html

Post your question on their online contact form and they get back to you by email or phone and provide the appropriate forms to make your claim.
June did this with her US SS as the first pension she received. She was told at the time that she should declare any other pensions when they commence.
The US SS comes direct to her UK bank account converted to £ at the official daily exchange rate with no deductions (we are USC)

Now, later, when she is now due to receive a UK occupational pension she uses the online form to contact FBU again, they sent the form SSA-308 upon which she enters info about the UK pension, attaches documentary evidence and posts it back to the embassy. This was over December - January and that's as far as we got right now. We await the outcome effect upon her US SS.
Goodness knows how it will work out and how they deal with the payments already received. The UK occupational companies were unable to predict the payment and so she only knew what she was receiving (and therefore what to report to US) when it actually started arriving.


(June is qualified for two UK occupational pensions and they didn't even calculate the same way because she was past her eligibility date. One paid a lump sum of the payments she had missed between eligible and commencing, the other adjusted her monthly amount going forward to compensate for the payments missed because of the delayed start)
The UK occupational pension co's directly advised HMRC that we were receiving UK pension and we went through a loop with HMRC in them deciding what tax code to give to pension co. for at source deduction.

Each time the FBU in London Embassy send the forms they ask if she is receiving UK SS and her answer remains no. Even though she has passed entitlement age she has deferred it (because she was still working in US at the time of entitlement and didn't need the income). This has not been queried further by FBU. We not sure of what will happen when she starts her UK SS. I have recently asked the question of FBU London and await an answer.

To the question of how much WEP can be deducted from US SS;
http://www.socialsecurity.gov/retire2/wep-chart.htm tabulates the maximums (which you may have seen) and then adds caveats that it may be more or less than value explicitly stated ;
1. Note: If your retirement benefits start after full retirement age or your non-covered pension starts later than your eligibility year, the WEP reduction may be greater than the maximum shown in the chart.
2. *Important: The maximum amount may be overstated. The WEP reduction is limited to one-half of your pension from non-covered employment.

We will report the US SS (and the UK occupational pensions) on our UK self-assessment first (this is the first year of pensions) and then relate it all onto US Filing.

I am a couple of years younger than June so we are experimenting somewhat with her pensions receipt before I become eligible for mine.

Last edited by J.JsOH; Feb 7th 2013 at 4:16 pm.
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Old Feb 7th 2013, 4:27 pm
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Default Re: UK state pension and USA social security

Originally Posted by J.JsOH View Post
I can partly answer your questions about US SS and UK pensions by relating some our our (her indoors) experiences.

If you are in UK (or anywhere else outside US) then you initiate your US SS through your local US Embassy.
http://london.usembassy.gov/cons_new...u_contact.html

Post your question on their online contact form and they get back to you by email or phone and provide the appropriate forms to make your claim.
June did this with her US SS as the first pension she received. She was told at the time that she should declare any other pensions when they commence.
The US SS comes direct to her UK bank account converted to £ at the official daily exchange rate with no deductions (we are USC)

Now, later, when she is now due to receive a UK occupational pension she uses the online form to contact FBU again, they sent the form SSA-308 upon which she enters info about the UK pension, attaches documentary evidence and posts it back to the embassy. This was over December - January and that's as far as we got right now. We await the outcome effect upon her US SS.
Goodness knows how it will work out and how they deal with the payments already received. The UK occupational companies were unable to predict the payment and so she only knew what she was receiving (and therefore what to report to US) when it actually started arriving.


(June is qualified for two UK occupational pensions and they didn't even calculate the same way because she was past her eligibility date. One paid a lump sum of the payments she had missed between eligible and commencing, the other adjusted her monthly amount going forward to compensate for the payments missed because of the delayed start)
The UK occupational pension co's directly advised HMRC that we were receiving UK pension and we went through a loop with HMRC in them deciding what tax code to give to pension co. for at source deduction.

Each time the FBU in London Embassy send the forms they ask if she is receiving UK SS and her answer remains no. Even though she has passed entitlement age she has deferred it (because she was still working in US at the time of entitlement and didn't need the income). This has not been queried further by FBU. We not sure of what will happen when she starts her UK SS. I have recently asked the question of FBU London and await an answer.

To the question of how much WEP can be deducted from US SS;
http://www.socialsecurity.gov/retire2/wep-chart.htm tabulates the maximums (which you may have seen) and then adds caveats that it may be more or less than value explicitly stated ;
1. Note: If your retirement benefits start after full retirement age or your non-covered pension starts later than your eligibility year, the WEP reduction may be greater than the maximum shown in the chart.
2. *Important: The maximum amount may be overstated. The WEP reduction is limited to one-half of your pension from non-covered employment.

We will report the US SS (and the UK occupational pensions) on our UK self-assessment first (this is the first year of pensions) and then relate it all onto US Filing.

I am a couple of years younger than June so we are experimenting somewhat with her pensions receipt before I become eligible for mine.
I thought life was supposed to be simpler in retirement?

Thanks for the info. It seems we have so many spring chickens on BE that not many people have reached retirement yet.

Out of pure interest I may go back onto the WEP calculator and stuff in some silly numbers for non-SS pension just to see the effect on how much it WEP's me. I'll come back and post the results.
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Old Feb 7th 2013, 4:44 pm
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
I thought life was supposed to be simpler in retirement?
....
lol, I wish. (I don't really, I enjoy the challenges) Maybe is simpler for some who spent their working life in one job in one place and sit back on a final pension it may be simpler ..... but for us dual citizens, multiple sources of (smaller) pensions and settling back in UK there is plenty of challenging stuff to overcome - and maybe it was being up for a challenge that caused us to wander in the first place.
I'm happier being out of the work environment than I was in it in the last few years. There were times when I loved work and it fulfilled me but those times passed and even though not simpler now, at least what I do now is on my own watch and no-one elses.
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Old Feb 7th 2013, 4:46 pm
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
I thought life was supposed to be simpler in retirement?

Thanks for the info. It seems we have so many spring chickens on BE that not many people have reached retirement yet.

Out of pure interest I may go back onto the WEP calculator and stuff in some silly numbers for non-SS pension just to see the effect on how much it WEP's me. I'll come back and post the results.
Hmmm, two interesting things:

When I bumped my hypothetical non-SS pension from $750 a month to $1,600 a month, it had very little additional WEP effect. Essentially, with a non-US SS pension income of $1,600 (I should be so lucky) I got WEP'd to the tune of a 45% reduction in SS pension (regardless of whether the scenario was receiving US SS pension from 62, 63, etc.). With the much lower non-US SS pension income of $750, I got WEP'd by 43%. So it appears that there is a gradual deceleration in the "WEP factor" the greater your non-US SS income. The difference was between a tenner and twenty quid a month (depending on when I chose to receive US SS - between 62 and 66 years of age).

Even more interesting was that my (nonexistent) surviving spouse would receive about two and a half times as much as I would receive! I need to get a wife and then do a Reggie Perrin! Where's the nearest beach?
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Old Feb 7th 2013, 6:56 pm
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
Hmmm, two interesting things:

When I bumped my hypothetical non-SS pension from $750 a month to $1,600 a month, it had very little additional WEP effect. Essentially, with a non-US SS pension income of $1,600 (I should be so lucky) I got WEP'd to the tune of a 45% reduction in SS pension (regardless of whether the scenario was receiving US SS pension from 62, 63, etc.). With the much lower non-US SS pension income of $750, I got WEP'd by 43%. So it appears that there is a gradual deceleration in the "WEP factor" the greater your non-US SS income. The difference was between a tenner and twenty quid a month (depending on when I chose to receive US SS - between 62 and 66 years of age).

Even more interesting was that my (nonexistent) surviving spouse would receive about two and a half times as much as I would receive! I need to get a wife and then do a Reggie Perrin! Where's the nearest beach?
I'll try this one more time.

Your calculations are correct.

The maximum subject to WEP for 2013 is $791.

$750 is below $791.

Below $791, the 50% calculation comes into play.

If your raised $1,600 a month figure were raised even more to $5,000, it wouldn't make any difference. The result would be the same as the $1,600 figure. If it were $800, the result would still be the same.

This is why you will always receive something.

(See post 34)
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Old Feb 7th 2013, 7:32 pm
  #84  
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Default Re: UK state pension and USA social security

Originally Posted by theOAP View Post
I'll try this one more time.

Your calculations are correct.

The maximum subject to WEP for 2013 is $791.

$750 is below $791.

Below $791, the 50% calculation comes into play.

If your raised $1,600 a month figure were raised even more to $5,000, it wouldn't make any difference. The result would be the same as the $1,600 figure. If it were $800, the result would still be the same.

This is why you will always receive something.

(See post 34)
Why didn't you say that the first time?

You didn't teach primary maths by any chance, did you?

OK, I am seeing a subtle difference in terminology - maximum amount "subject to" WEP and "maximum WEP amount" ... that was the confusing part I was trying to tease out in my earlier post about the 3 different criteria. In that and other posts all I needed was for someone to point out that difference ... where did the $791 come from, though? The only place I see that figure is where they explain how they calculate the amount of US SS received:

"Social Security benefits are based on the worker’s average monthly earnings adjusted for inflation. We separate your average earnings into three amounts and multiply the amounts using three factors. For example, for a worker
who turns 62 in 2013, the first $791 of average monthly earnings is multiplied by 90 percent; the next $3,977 by 32 percent; and the remainder by 15 percent. The sum of the three amounts equals the total monthly payment amount."

In your post #34, the page in the link doesn't include an amount of $791 as being the maximum amount of non US SS-based pension that iis subject to WEP ... unless my browser isn't showing the whole table. The table title is "Maximum Monthly Amount Your Benefit May Be Reduced Because Of The Windfall Elimination Provision (WEP)" - hence my confusion about the concept of the maximum amount by which WEP will be reduced, not the maximum amount (of non-USS pension) that will be "subject to" WEP, which is what you seem to be talking about above.

Bloody Hell, discussing this stuff is exhausting. I'll drop dead of a heart attack before I even reach retirement at this rate.

Besides, I'm more interested in where my nonexistent wife is hiding ...
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Old Feb 7th 2013, 7:50 pm
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Default Re: UK state pension and USA social security

also remember that any part of your UK SS that is due to NICs not connected with employment should not be included in the WEP calculation. For example I have 27 years of voluntary NICs and 3 years of credits for when I was at sixth form college. None of these contribution are connected with non-SS wages so I am not going to include my UK SS in any WEP calculations. It turns out that that is actually irrelevant for me becuase I work for a state that does not participate in SS so I have a non-SS wage state pension that will cause my SS from previous jobs to be WEPed to the max.
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Old Feb 7th 2013, 8:02 pm
  #86  
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Default Re: UK state pension and USA social security

If you want chapter and verse on WEP see here (the $791 number is explained)

http://www.fas.org/sgp/crs/misc/98-35.pdf
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Old Feb 7th 2013, 8:12 pm
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
Why didn't you say that the first time?

You didn't teach primary maths by any chance, did you? ...
Hell no, I changed majors at uni when I got to advanced calculus! (True story.)

Step 1: Forget about all that 90%, next 32%, remainder by 15% stuff. That's for the big time expats with big pensions. Think Bob Diamond. It's actually related to those who have enough to reach a second break point. $791 is the first break point. I'm not even 100% positive they use it for those with foreign pensions. Once I gave the person that interviewed me sufficient income to take me over the 1st break point, they weren't even interested in the figures beyond that. "I'll just note you have these additional pensions."

For us mortals, once you go over $791 (for 2013) in non-contributing income, the reduction for WEP stays the same, no matter how high you go. If it's under $791, the SSA will only reduce the number by 50%.

The key: $791 relates to an annually changing maximum for non-contributory income. The 50% rule dictates that the maximum amount a pension can be reduced is by 50%. Therefore, the maximum a non-contributory pension can be reduced by is $390.50 (50% of $791). If it's below $791, the amount can only be reduced by 50%.

Is WEP fair?

If you like, nun and I will entertain you to our long standing (and friendly) discussion on the fairness of WEP! We've been over this ground many times, and explaining all this is never easy.
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Old Feb 7th 2013, 8:20 pm
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
also remember that any part of your UK SS that is due to NICs not connected with employment should not be included in the WEP calculation. For example I have 27 years of voluntary NICs and 3 years of credits for when I was at sixth form college. None of these contribution are connected with non-SS wages so I am not going to include my UK SS in any WEP calculations. It turns out that that is actually irrelevant for me becuase I work for a state that does not participate in SS so I have a non-SS wage state pension that will cause my SS from previous jobs to be WEPed to the max.
My God, there are exceptions to the exceptions!

That's quite fascinating, and good news for all expats who are topping up NICs while in the US. It seems odd though that UK pension from these voluntary NICs (that are cheap as chips) is not used to punish you, whereas UK pension from employment based NICs which cost a heck of a lot more, are used to punish you. It makes less and less sense the more I learn about it.
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Old Feb 7th 2013, 8:30 pm
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Default Re: UK state pension and USA social security

Originally Posted by theOAP View Post
Hell no, I changed majors at uni when I got to advanced calculus! (True story.)

Step 1: Forget about all that 90%, next 32%, remainder by 15% stuff. That's for the big time expats with big pensions. Think Bob Diamond. It's actually related to those who have enough to reach a second break point. $791 is the first break point. I'm not even 100% positive they use it for those with foreign pensions. Once I gave the person that interviewed me sufficient income to take me over the 1st break point, they weren't even interested in the figures beyond that. "I'll just note you have these additional pensions."

For us mortals, once you go over $791 (for 2013) in non-contributing income, the reduction for WEP stays the same, no matter how high you go. If it's under $791, the SSA will only reduce the number by 50%.

The key: $791 relates to an annually changing maximum for non-contributory income. The 50% rule dictates that the maximum amount a pension can be reduced is by 50%. Therefore, the maximum a non-contributory pension can be reduced by is $390.50 (50% of $791). If it's below $791, the amount can only be reduced by 50%.

Is WEP fair?

If you like, nun and I will entertain you to our long standing (and friendly) discussion on the fairness of WEP! We've been over this ground many times, and explaining all this is never easy.
Are you kidding? In one post you just made it crystal clear in a way I haven't understood it in years of asking questions. Thanks! The scales have fallen from my eyes, as they say ... what a bloody relief (honestly - I thought I was going insane).

Between this and Nun convincing me to give the online calculator another go, I am light years ahead of where I was earlier today (and ever since I started trying to figure this out). I am doing the calculations to see if I can possibly retire early and this is helping to make the picture a lot clearer. [And yes, I am pretty good at doing calculations normally - I'm an applied statistician, believe it or not. For some reason, I seem to be semi-illiterate when it comes to these accountancy and actuarial-type calculations]

As much as I am sure that you and Nun would be highly entertaining when you get together, if the conversation has anything to do with WEP, I think I'll pass.

Last edited by dunroving; Feb 7th 2013 at 8:36 pm.
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Old Feb 9th 2013, 11:27 am
  #90  
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
If you want chapter and verse on WEP see here (the $791 number is explained)

http://www.fas.org/sgp/crs/misc/98-35.pdf
Just wanted to say I read this and it is much clearer than the 2-page WEP summary that most people would get to if they ran a Google search for WEP or ran a search on the US SS gov Web site.

I recommend it as reqired readnig for anyone who thinks they may be affected by the WEP. I highlighted sections with the Acrobat highlight tool and have saved in my "retirement" folder until needed next. Just hope the rules haven't changed by then.
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