Go Back  British Expats > Living & Moving Abroad > USA
Reload this Page >

UK state pension and USA social security

UK state pension and USA social security

Old Jan 26th 2016, 11:48 pm
  #1066  
nun
BE Forum Addict
 
nun's Avatar
 
Joined: Aug 2004
Posts: 4,721
nun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by kodokan View Post
Random thing I've been wondering, and since all the usual suspects are on this thread...

It's about WEP and lump sums. Am I right in thinking that the WEP calculation allows for someone having taken a foreign/ non-SS earnings funded pension as a lump sum rather than annuitized into a pension? If so, I assume some background actuarial work is done to notionally change this into a stream of pretend income payments, and WEP applied accordingly.

Assuming the above, how does it allow for time slip between the two transactions? Say, for example, someone takes their UK pension as a lump sum aged 55. Approaching age 70, they now apply for SS, and dutifully report that yes, they have at one time taken a lump sum in place of a pension, and supply details.

How would inflation be accounted for? And exchange rates for the lump sum, in order to even start the calculation - use the one for the year of the SS application, or the one from 15 years ago when the lump sum was crystallized into dollars, and declared as taxable income?
All good questions.....I bet the SSA would just ask for the amount of the non-SS income in the year you applied for SS and use that for WEP.
nun is offline  
Old Jan 27th 2016, 1:30 am
  #1067  
Forum Regular
 
Disenchanted's Avatar
 
Joined: Feb 2013
Location: Los Angeles
Posts: 157
Disenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond reputeDisenchanted has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by mrken30 View Post
With all these horror stories I'm not sure if I want to retire
The SSA don't want you to retire. They'd love it if you kept on working and paying in until you dropped dead, then they wouldn't need to pay you any SS pension.

A win-win for them.
Disenchanted is offline  
Old Jan 27th 2016, 2:48 am
  #1068  
BE Forum Addict
 
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 2,348
durham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond reputedurham_lad has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by kodokan View Post
I see the whole thing as a giant logic puzzle to gameify, like playing financial Sudoku or chess. How best can I arrange my pieces for maximum yield, taking into account:

- tax relief on contributions into tax-deferred accounts now
- being in a much lower tax bracket later
- early retirement in our 50s
- a window of 8-12 years for 401k-Roth rollovers
- optimal AGI/MAGI for ACA subsidies
- timings to take various UK/ US state and private pensions, given WEP and taxes
- voluntary contributions into the UK state pension

Everyone has to have a hobby...
Exactly

We are just starting our 7th year of retirement, after retiring at age 55, and it certainly beats the bejeebers out of working.
durham_lad is offline  
Old Jan 27th 2016, 3:16 pm
  #1069  
BE Forum Addict
 
rogerpenycate's Avatar
 
Joined: Jun 2002
Location: Virginia
Posts: 1,420
rogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud of
Default Re: UK state pension and USA social security

one thing I found is that I (seemingly) can 'earn' $100,000 in foreign (UK) earnings before pay tax.I also don't consider that I 'earned' my pension during the time I have lived in the US.It was money I paid into the UK State pension scheme before I came here.All I am doing (effectively) is getting it back ??
rogerpenycate is offline  
Old Jan 27th 2016, 3:19 pm
  #1070  
Lost in BE Cyberspace
 
mrken30's Avatar
 
Joined: Jul 2008
Location: Portlandia Metro
Posts: 7,145
mrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by durham_lad View Post
Exactly

We are just starting our 7th year of retirement, after retiring at age 55, and it certainly beats the bejeebers out of working.
I could never understand my old boss wanting to work till he was 70. He had paid off his mortgage 20 years ago and was making $140-$150k a year just going into the bank.
mrken30 is offline  
Old Jan 28th 2016, 9:49 am
  #1071  
BE Forum Addict
 
Joined: Apr 2011
Location: The Shire
Posts: 1,080
theOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by rogerpenycate View Post
one thing I found is that I (seemingly) can 'earn' $100,000 in foreign (UK) earnings before pay tax.
Do you meet the requirements of US Code Section 911, mainly either for physical presence abroad or for bona fide residence abroad? Is the income earned income only? Paid pension benefits are not earned income.
Originally Posted by rogerpenycate View Post
I also don't consider that I 'earned' my pension during the time I have lived in the US.
At the time of "earning" the pension, did you file a US return 1040 declaring all contributions you made to the pension, all contributions any employer made to the pension, and any yearly growth in the fund?
theOAP is offline  
Old Jan 28th 2016, 11:14 am
  #1072  
BE Forum Addict
 
rogerpenycate's Avatar
 
Joined: Jun 2002
Location: Virginia
Posts: 1,420
rogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud ofrogerpenycate has much to be proud of
Default Re: UK state pension and USA social security

2015 is my first year of getting my UK state pension and during the 14 years I've been here I didn't make contributions into the pension.
Re the $100K I just noticed it somewhere in my 'research' and I'm not sure what it referred to.
Thank you for your help
rogerpenycate is offline  
Old Jan 28th 2016, 4:02 pm
  #1073  
BE Forum Addict
 
Joined: Apr 2011
Location: The Shire
Posts: 1,080
theOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by rogerpenycate View Post
2015 is my first year of getting my UK state pension and during the 14 years I've been here I didn't make contributions into the pension.
Re the $100K I just noticed it somewhere in my 'research' and I'm not sure what it referred to.
Thank you for your help
I don't mean to be presumptive, but I had the feeling the info from your accountant came as a bit of a shock, and there are things you don't quite understand regarding this situation. Then us lot, a bolshie bunch of strangers on the internet, told you the accountant was basically right. At the same time, you've read about "a treaty and it says that if I don’t have topay tax on any earnings in the UKI don’t have to pay tax on it here",.... "I (seemingly) can 'earn' $100,000 in foreign (UK) earnings before pay tax",....and the thought "It was money I paid into the UK State pension scheme before I came here." None of this makes sense to you. That's understandable.

You've also mentioned "I had no idea I had to declare pension income, either state or private and have also been receiving 2 x $600 (approx) for 14 years (since I've been here !!" It's this bit that also caught my eye.

Start with the UK State pension. According to the treaty, someone in your position (US resident for tax purposes) will pay tax to the US on the UK State pension. I'll provide a link to the "Technical Explanation" of the treaty. It's easier to read and understand than the treaty alone. You're looking for Article 17.

https://www.treasury.gov/resource-ce...ts/teus-uk.pdf

The US taxes on worldwide income. If you were in the UK, paying tax on the arising basis, it would be exactly the same. The UK would tax you on worldwide income. I live in the UK. I have pensions from France, and the UK tax me on them because I'm resident in the UK. Generally (and there are exceptions), it doesn't matter how the income came about, you're taxed on it because you're a resident for tax purposes. The UK taxes me on the UK State pension and the US also taxes me on the UK State pension because I'm a US citizen (USCs are deemed resident in the US for tax purposes). I have ways around it, because of my physical residence, but you don't since you're physically resident in the US, and the UK deducts no tax from the pension.

There are ways to reduce tax on foreign pensions by establishing a basis in the pension (already paid tax to US at time of employment). In your case, this didn't happen because you were not yet (I assume) a US Person. In any case, unless we're discussing voluntary contributions, establishing a basis in the UK State pension is impossible due to NI class 1 contributions being for more than the pension alone.

As for the "$100K [you] just noticed [.] somewhere in [your] 'research", yes, for some people, they can have $100,000 of UK income free of US tax, BUT, you have to be resident outside the US (like me) for the better part of the full year for this to apply (search for FEIE). Also unfortunately, this only applies to earned income (wages related), not pensions.

This may help to get you started to understanding. If, and when, more questions pop up, come back and ask us.

And don't forget about WEP.

Last edited by theOAP; Jan 28th 2016 at 6:02 pm. Reason: One paragraph was a grammatical mess. It's still not much better.
theOAP is offline  
Old Jan 28th 2016, 6:13 pm
  #1074  
BE Forum Addict
 
Joined: Apr 2011
Location: The Shire
Posts: 1,080
theOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond reputetheOAP has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by theOAP View Post
The US taxes on worldwide income. If you were in the UK, paying tax on the arising basis, it would be exactly the same. The UK would tax you on worldwide income. I live in the UK. I have pensions from France, and the UK tax me on them because I'm resident in the UK. Generally (and there are exceptions), it doesn't matter how the income came about, you're taxed on it because you're a resident for tax purposes. The UK taxes me on the UK State pension and the US also taxes me on the UK State pension because I'm a US citizen (USCs are deemed resident in the US for tax purposes). I have ways around it, because of my physical residence, but you don't since you're physically resident in the US, and the UK deducts no tax from the pension.
I've only come back to this, but ran out of time to edit the above. So here's the edited version.

Concerning the 2 x $600 income, the US taxes on worldwide income. If you were in the UK, paying tax on the arising basis, it would be exactly the same. The UK would tax you on worldwide income. I live in the UK. I have pensions from France, and the UK tax me on them because I'm resident in the UK. Generally (and there are exceptions), it doesn't matter how the income came about, you're taxed on it because you're a resident for tax purposes. The UK taxes me on the UK State pension and the US also taxes me on the UK State pension plus the French pensions, because I'm a US citizen (USCs are deemed resident in the US for tax purposes). I have ways around it, because of my physical residence, but you don't since you're physically resident in the US, and the UK deducts no tax from the pension.
theOAP is offline  
Old Jan 29th 2016, 12:39 am
  #1075  
Lost in BE Cyberspace
 
mrken30's Avatar
 
Joined: Jul 2008
Location: Portlandia Metro
Posts: 7,145
mrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond repute
Default Re: UK state pension and USA social security

Do you happen to know the situation with regards to rental income and living in the UK. This sounds scary

Such passive rental income is subject to a flat 30 percent withholding tax (unless reduced by an applicable income tax treaty) applied to the gross income rather than the "net rent" received.
mrken30 is offline  
Old Jan 29th 2016, 1:55 am
  #1076  
nun
BE Forum Addict
 
nun's Avatar
 
Joined: Aug 2004
Posts: 4,721
nun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by mrken30 View Post
Do you happen to know the situation with regards to rental income and living in the UK. This sounds scary

Such passive rental income is subject to a flat 30 percent withholding tax (unless reduced by an applicable income tax treaty) applied to the gross income rather than the "net rent" received.
Where's the rental, what is the residence and citizenship of the owner? Even if there is 30% withholding (and I doubt that for US/UK taxes on US/UK residents) you get to apply withholding to your tax bill.
nun is offline  
Old Jan 29th 2016, 2:50 am
  #1077  
Lost in BE Cyberspace
 
mrken30's Avatar
 
Joined: Jul 2008
Location: Portlandia Metro
Posts: 7,145
mrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond repute
Default Re: UK state pension and USA social security

Rentals in both US and UK, just curious what the situation would be if I lived in the UK.
mrken30 is offline  
Old Jan 29th 2016, 2:00 pm
  #1078  
nun
BE Forum Addict
 
nun's Avatar
 
Joined: Aug 2004
Posts: 4,721
nun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond reputenun has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by mrken30 View Post
Rentals in both US and UK, just curious what the situation would be if I lived in the UK.
The DTA (Article 6) gives primary the right of taxation on rentals to the residence country, but if you live in one country and own a rental in the other you'll still have to comply with the tax rules in the other country as you have source income in that country, but you'd be able to apply FTCs for the tax you paid to your residence contry against any tax due.

Last edited by nun; Jan 29th 2016 at 2:04 pm.
nun is offline  
Old Jan 29th 2016, 6:51 pm
  #1079  
Lost in BE Cyberspace
 
mrken30's Avatar
 
Joined: Jul 2008
Location: Portlandia Metro
Posts: 7,145
mrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond reputemrken30 has a reputation beyond repute
Default Re: UK state pension and USA social security

Originally Posted by nun View Post
The DTA (Article 6) gives primary the right of taxation on rentals to the residence country, but if you live in one country and own a rental in the other you'll still have to comply with the tax rules in the other country as you have source income in that country, but you'd be able to apply FTCs for the tax you paid to your residence contry against any tax due.
In otherwords it may get complicated, because tax rule for rentals in the US are very different to the UK. Depreciation being just one difference.
mrken30 is offline  
Old Jan 29th 2016, 8:10 pm
  #1080  
Just Joined
 
Joined: Jan 2016
Posts: 5
Levans is an unknown quantity at this point
Smile Re: UK state pension and USA social security

My wife is 63 just claimed her uk state pension , we have lived here in the USA for 18yrs we have duel citizenship , my wife will claim her US social security in 3 yrs , will her uk state pension affect her US social security when she claims , we will have lived here for 21 yrs , also do we have to pay tax on our Uk pension . Thank you for any help you can give us , we are new to this site why did it take us so long to find it , it looks a great site and we look forward to using it a lot more .
Levans is offline  

Contact Us Archive Advertising Cookie Policy Privacy Statement Terms of Service

Copyright © 2018 MH Sub I, LLC dba Internet Brands. All rights reserved. Use of this site indicates your consent to the Terms of Use.