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UK state pension and USA social security

UK state pension and USA social security

Old Feb 9th 2013, 7:43 pm
  #91  
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
That is helpful - though it seems strange they differentiate betwee the two types of NICs. ...
WEP relates to "pensions from work not covered by Social Security."
Class 3 contributions do not relate to work (employment or self employment). Class 1 and Class 2 do relate to work.
Class 3 have traditionally been paid by (1) university students (2) folks on the dole, industrial tribunal awards (3) Expats, especially full time housewives. None was from work.
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Old Feb 9th 2013, 7:50 pm
  #92  
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Default Re: UK state pension and USA social security

Originally Posted by holly_1948 View Post
WEP relates to "pensions from work not covered by Social Security."
Class 3 contributions do not relate to work (employment or self employment). Class 1 and Class 2 do relate to work.
Class 3 have traditionally been paid by (1) university students (2) folks on the dole, industrial tribunal awards (3) Expats, especially full time housewives. None was from work.
Class 2 voluntary NI are not connected with non-SS work so they don't count in WEP, but you are right in that they can only be paid if you are working or self-employed abroad.
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Old Feb 9th 2013, 8:20 pm
  #93  
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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.
Scuse me butting in here but I read the 50% rule differently than I think you are stating; I read it that the US SS can be WEP'd by up to 50% of the non-covered pension, not 50% max of the US SS.
My interpretation comes from http://www.ssa.gov/pubs/10045.html#a0=5 and says if you get a relatively low pension, you are protected. The reduction in your Social Security benefit cannot be more than one-half of the amount of your pension that is based on earnings after 1956 on which you did not pay Social Security taxes.

However, as I read your prev posts, I suspect the 50% of non-covered pension applies only up to equiv of (my mere mortals) $791 break point. Maybe that was the bit I was missing. Right? So they can't WEP off more than $791/2 ($395.5) of my US SS?

Last edited by J.JsOH; Feb 9th 2013 at 8:55 pm.
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Old Feb 9th 2013, 8:40 pm
  #94  
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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.
Thanks for this explanation. It's quite useful and timely for us, prior to starting a UK State pension. I made a note of it on our record of NIC's we received from HMRC.
For an UK occupational pension we already started we did not include the proportion connected to AVC's as they are voluntary out-of-pocket payments.

Our experiences so far with US SS is that we the consumer need to know the rules and exceptions because Fed Benefits Unit have not being asking question to this detail. Without being aware of these exceptions it would have been easy to just report the full amount of pension in the belief that Fed Ben knows what they are doing and would see us right.
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Old Feb 9th 2013, 8:54 pm
  #95  
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Default Re: UK state pension and USA social security

Originally Posted by J.JsOH View Post
Thanks for this explanation. It's quite useful and timely for us, prior to starting a UK State pension. I made a note of it on our record of NIC's we received from HMRC.
For an UK occupational pension we already started we did not include the proportion connected to AVC's as they are voluntary out-of-pocket payments.
Did you make the AVCs while you were working in the UK......if so my opinion would be that they should be included for WEP, but that's just an opinion, I have no definite knowledge about it.
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Old Feb 9th 2013, 10:17 pm
  #96  
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Default Re: UK state pension and USA social security

Originally Posted by J.JsOH View Post
I read it that the US SS can be WEP'd by up to 50% of the non-covered pension, not 50% max of the US SS.
This wouldn't work. If the non-covered pension was $2000/month, 50% of that is $1000. If your SS pension (prior to WEP) was $600, then you would have $0 for a SS pension (actually -$400).

Originally Posted by J.JsOH View Post
My interpretation comes from http://www.ssa.gov/pubs/10045.html#a0=5 and says if you get a relatively low pension, you are protected. The reduction in your Social Security benefit cannot be more than one-half of the amount of your pension that is based on earnings after 1956 on which you did not pay Social Security taxes.
Or are there more than one 50% rules?
Can you come back to me on this please?
What the SSA publication is trying to say (IMHO) is if a $400/month SS pension (a relatively low SS pension) were WEPed at the maximum amount of $390.50 because you have a foreign pension of over $791/month, the $400/month SS pension (as calculated) based on earnings after 1956 on which you did not pay Social Security taxes would be ($400 - 390.50) $9.50. They guarantee that won't happen.
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Old Feb 9th 2013, 11:07 pm
  #97  
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Default Re: UK state pension and USA social security

OK, I can't leave this alone.

[RANT]
The SSA publications are poorly worded. If someone took the time to really look at WEP, as those on this thread are doing, they would soon discover the 'unfairness' of WEP towards those with low preWEP retirement incomes dependent mainly on low foreign pensions. Compare the postWEP incomes of someone with a foreign pension of $800/month and a US SS benefit of $500/month verses someone with a foreign pension of $5000/month and a US SS preWEP benefit of $1200/month. The percentage of income lost to WEP is not balanced.

The original intention of the highly complicated 90%, 40%, 15% calculations for SS were to give those with low retirement incomes a more equitable share of the pie. IMHO when foreign pensions are involved they hope you take what they give you, as a fait accompli or gratefully, without looking too closely. There is an attempt to justify WEP as relates to foreign pensions, but it falls apart in several different areas. Under the circumstances it was originally written (which had nothing to do with foreign pensions), and considering the benefits available to those with larger US opt-out pensions that pay benefits equal to US SS, it makes sense.
[/RANT]
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Old Feb 10th 2013, 7:48 am
  #98  
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Default Re: UK state pension and USA social security

I'd like to change the order of words in the last paragraph of my RANT above in order to make it clearer, now that the red mist (due to WEP, not the good people on this thread) has cleared.

"The original intention of the highly complicated 90%, 40%, 15% calculations for normal US SS (before WEP was a factor) were to give those with low retirement incomes a more equitable share of the pie. There is an attempt to justify WEP as relates to foreign pensions, but it falls apart in several different areas. IMHO when foreign pensions are involved they hope you take what they give you, as a fait accompli or gratefully, without looking too closely. Under the circumstances it (WEP) was originally written (which had nothing to do with foreign pensions), and considering the benefits available to those with larger US opt-out pensions that pay benefits equal to US SS, it makes sense."

@J.JsOH
I missed your edit to post #93 in my reply.

The concern for the SSA discussions on WEP is due to the shift from referencing US SS to non-covered pensions without making clear which 'pension' they are talking about. They only say 'pension'. The same goes for 'a protection' and 'one half' or '50%'.
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Old Feb 10th 2013, 10:46 am
  #99  
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Default Re: UK state pension and USA social security

Originally Posted by theOAP View Post
This wouldn't work. If the non-covered pension was $2000/month, 50% of that is $1000. If your SS pension (prior to WEP) was $600, then you would have $0 for a SS pension (actually -$400).


What the SSA publication is trying to say (IMHO) is if a $400/month SS pension (a relatively low SS pension) were WEPed at the maximum amount of $390.50 because you have a foreign pension of over $791/month, the $400/month SS pension (as calculated) based on earnings after 1956 on which you did not pay Social Security taxes would be ($400 - 390.50) $9.50. They guarantee that won't happen.
Yes, this is why I was getting my knickers in a twist (that's "panties in a wad" to our American cousins) previously.

By both criteria (max of $390.50 and max of 50% of the non-SS pension). I was wondering the same thing - if my US SS pension was low enough (say, $350) and my non-SS pension high enough (say, a UK pension of $700, though I'd hardly call that "high") the max reduction due to WEP could potentially be higher than I was due to receive ... hence my worry about being WEP'd completely. This was based on a very literal reading of the documentation provided by the .gov sites.

As you clarified for me, they have safeguards in place to ensure this doesn't happen, and as you also say here, the documentation is VERY poorly worded. It's only through discussing on here, and playing around with the online modeller that I am now (fairly) reassured I won't be WEP'd of all my US SS entitlement.

How the Joe Hill can normal people plan for retirement when the regulations are explained in such an opaque manner and when the pension rules change from one government to the next (I'm referring to UK pension rules; as far as WEP is concerned, I wish they WOULD change the rules)?
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Old Feb 10th 2013, 11:30 am
  #100  
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Default Re: UK state pension and USA social security

Slightly off-topic, there is an article on the BBC News Web site describing the new UK state pension. Nothing drastically new, but I was interested to see (bottom of the page) that people who paid for work-related pensions and so "contracted out" of the additional pension (SERPS) may not get the full amount of the new flat-rate pension.

So, "more straighforward", but still not "straighforward".
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Old Feb 10th 2013, 11:38 am
  #101  
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
Class 2 voluntary NI are not connected with non-SS work so they don't count in WEP, but you are right in that they can only be paid if you are working or self-employed abroad.
Is this also true if they are paid in arrears (top-ups), after returning to the UK and therefore while you are in UK-based, Class I NI-paying work?

So, if you were away working overseas from 2000-2010 and return to the UK in 2010, and subsequently (say in 2011) want to make up some of these missed years would you pay Class 2 NICs (as you would have if you'd paid them during those years), or if paid in arrears would they have to be Class 3?

I am assuming they should still be Class 2 (because the years you would be buying would nevertheless still be unrelated to non-SS work), but wondered if you or anyone else has experience of this.

Long shot, but information I was given by HMRC (in writing) told me I would have to pay Class 3 NICs (more expensive, by about 3x to 4x) for my missing years, which is why I decided not to do it. I am now past the deadline date to make up these years and am wondering if I can appeal the 6-year rule on the basis I was given incorrect information ... I've set up a meeting with CAB (not sure they will know) as a start.
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Old Feb 17th 2013, 4:18 pm
  #102  
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Default Re: UK state pension and USA social security

I have just joined this forum as I am concerned about the WEP and how it will be reduced when I start claiming in June 2013.

Forgive me if this has already been answered earlier, but there are many confusing replies.

My question is relatively simple. Is WEP only enforced if you receive a UK state pension, or does it apply to any other pension from the UK?

Currently I am receiving a Teachers Pension from the UK and have deferred the UK state pension. I have not yet started claiming US Social Security for which I have paid into since 1997. I presume I have to mention the Teachers Pension to US Soc Sec as I already declare it on my tax returns.

Thanks in advance.

G
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Old Feb 17th 2013, 4:47 pm
  #103  
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Default Re: UK state pension and USA social security

How many years do you have in which to make up the contributions not paid to the UK? I've been away 30 years and, if it is possible, I would like to consider paying them so I can get a UK pension - at least it is an idea I am entertaining.
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Old Feb 17th 2013, 6:49 pm
  #104  
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Default Re: UK state pension and USA social security

Originally Posted by windsong View Post
How many years do you have in which to make up the contributions not paid to the UK? I've been away 30 years and, if it is possible, I would like to consider paying them so I can get a UK pension - at least it is an idea I am entertaining.
You can only pay up to around 6 years in arrears, and each year, it moves forward. So (approximately) you can no longer pay up years you missed prior to 2007 (approximately).
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Old Feb 18th 2013, 9:06 pm
  #105  
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Default Re: UK state pension and USA social security

Originally Posted by Bog lift View Post
I have just joined this forum as I am concerned about the WEP and how it will be reduced when I start claiming in June 2013.

Forgive me if this has already been answered earlier, but there are many confusing replies.

My question is relatively simple. Is WEP only enforced if you receive a UK state pension, or does it apply to any other pension from the UK?

Currently I am receiving a Teachers Pension from the UK and have deferred the UK state pension. I have not yet started claiming US Social Security for which I have paid into since 1997. I presume I have to mention the Teachers Pension to US Soc Sec as I already declare it on my tax returns.

Thanks in advance.

G
When WEP is applied it is on any pension from anywhere that was built from a salary that did not contribute to US SS.

So your UK teachers pension will be considered as non-US SS contributing and will potentially be applied to make a WEP reduction to your US SS pension when you start taking your US SS and yes, you must report your non-SS contributing pensions. Federal benefits unit is very keen to ensure you know that you need to do this.

My wife receives US SS and gets WEP reduction for her two small UK occupational pensions. She has deferred her UK state pension but will be WEP'd on that when it commences.
I receive a UK military pension. I will be WEP'd for it when I commence my US SS and WEP'd more when I commence my occupational and UK state pensions.
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