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WEP and the SSA

WEP and the SSA

Old Sep 12th 2016, 2:07 am
  #16  
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Default Re: WEP and the SSA

Originally Posted by SandraAnn View Post
That. That right there is the info I was looking for--so it's a straight ratio of years worked in the UK over years required to qualify for the pension to determine the "WEP-able" portion of my British pension. The ratio represents the value of that portion of the pension upon which U.S. SS taxes were not paid (and, therefore subject to the WEP). The rest of the pension's value was earned through voluntary payments in the U.S., which were paid after U.S. taxes and exempt from the WEP. Now I can use the WEP calculator. Thanks so much.

BTW, Inland Revenue now requires only 30 years of National Insurance stamps payment to qualify for a pension, so my ratio is 21/30.

Thanks again, and thanks to those others who answered!

Sandra
If you qualify for the new UK state pension after 6th April 2016 you'll need 35 years of NICs to get the full amount.
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Old Sep 12th 2016, 2:17 am
  #17  
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Default Re: WEP and the SSA

Originally Posted by Asg123 View Post
There's also a complication that originally I had 2 pensions, an employment and a non-employment stakeholder pension that I continued to contribute to for 5 years after coming to the US, I closed my employment pension and transferred the proceeds to my stakeholder pension after I left my job, so I'll have to think about how to work out how much of my withdrawal originates from the employment pension which I understand is what I have to report to SSA.

This could be a can of worms. Hopefully you made those contributions more than 6 years ago and I wouldn't mention them in an open forum again.

If you are doing drawdown over a number of years you won't be liable to any UK tax, just US and your 25% UK tax free amount will also be tax free in the US.

Last edited by nun; Sep 12th 2016 at 3:33 am.
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Old Sep 12th 2016, 4:00 am
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Default Re: WEP and the SSA

Originally Posted by SandraAnn View Post
That. That right there is the info I was looking for--so it's a straight ratio of years worked in the UK over years required to qualify for the pension to determine the "WEP-able" portion of my British pension. The ratio represents the value of that portion of the pension upon which U.S. SS taxes were not paid (and, therefore subject to the WEP). The rest of the pension's value was earned through voluntary payments in the U.S., which were paid after U.S. taxes and exempt from the WEP. Now I can use the WEP calculator. Thanks so much.

BTW, Inland Revenue now requires only 30 years of National Insurance stamps payment to qualify for a pension, so my ratio is 21/30.

Thanks again, and thanks to those others who answered!

Sandra
I meant 12/30
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Old Sep 12th 2016, 4:50 am
  #19  
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Default Re: WEP and the SSA

Originally Posted by lansbury View Post
Remember the WEP is only calculated once, when you apply for SS. In your case when you are coming up to claim SS get a quote for an annunity that your UK pension fund would buy. That figure is what you base your UK pension on. Decide how much of that is from your employment and give the SS office that figure.

As long as you can show SS how that figure was obtained and that it meets the WEP rules I doubt they will dispute it. When Mrs L claimed she found them very accommodating in respect to WEP.
I applied for SS online and stated that I wasn't getting a pension (as I haven't made any withdrawals yet so cannot be considered to have received or be receiving a pension) but that I would be at a future date. A couple of days later I got a phone call and they asked the same question and I confirmed no, he then said that on the application you've stated that you'll start getting a pension (my first withdrawal) on such future date, when you do phone us and let us know so you'll get the correct payment. At the moment I'm getting SS with no WEP reduction. When I make my first withdrawal I'll phone them to get WEP applied and bear in mind what you said, thank you.

I had thought that each time I make a withdrawal I have to phone them and they will make a WEP reduction based only on that withdrawal, it hadn't occurred to me that they may apply a one-time WEP reduction based on the value of the whole pension fund when I make my first withdrawal.
Thanks for the replies.
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Old Sep 12th 2016, 4:51 am
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Default Re: WEP and the SSA

Originally Posted by nun View Post
This could be a can of worms. Hopefully you made those contributions more than 6 years ago and I wouldn't mention them in an open forum again.

If you are doing drawdown over a number of years you won't be liable to any UK tax, just US and your 25% UK tax free amount will also be tax free in the US.
That's good.
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Old Sep 12th 2016, 12:24 pm
  #21  
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Default Re: WEP and the SSA

Originally Posted by SandraAnn View Post
I meant 12/30
Double check your contribution years. After 6th April 2016 the new state pension is being phased in and your pension will be calculated using your pension amount up to 6th April 2016 and then each contribution year after that
adds £4.45 to the weekly amount. You might not get the most you can with just 30 years of contributions.
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Old Sep 12th 2016, 12:52 pm
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Default Re: WEP and the SSA

Originally Posted by Asg123 View Post
..... it hadn't occurred to me that they may apply a one-time WEP reduction based on the value of the whole pension fund when I make my first withdrawal.
Thanks for the replies.
Yes, and it is also a one-time calculation for exchange rate purposes. So if the pound falls in value against the dollar after your WEP has been deternined, you will lose out, but if the pound gains in value, you will win. If your WEP is calculated today you will be significantly better off than if your WEP had been calculated two years ago when the GBP/USD rate was $1.70.

Last edited by Pulaski; Sep 12th 2016 at 12:58 pm.
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Old Sep 12th 2016, 12:57 pm
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Default Re: WEP and the SSA

Originally Posted by nun View Post
Is this correct? If it is WEP could be avoided by taking the entire pension as a lump sum.
I was wrong about that (thank you Lansbury for straightening me out), but your post reminded me, there is another strategy for reducing WEP that others have pursued - of delaying claiming SS while depleting other pension savings so that they are gone, or at least reduced before a claim for SS is made. .... Can you live on the 25% lump sum for a while, and then make other drawings on your non-US pension savings so that they are all gone before you claim SS?
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Old Sep 12th 2016, 5:24 pm
  #24  
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Default Re: WEP and the SSA

Isn't there a foreign pension income threshold that WEP applies to? So in effect there is a limit to how much your SS payments will be reduced. I'd need to run the WEP calculator again but I thought there was a maximum dollar amount or % you could get hit with.
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Old Sep 12th 2016, 6:01 pm
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Default Re: WEP and the SSA

The WEP reduction is limited to one-half of your pension from non-covered employment.

Very bottom of this page https://www.ssa.gov/planners/retire/wep-chart.html
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Old Sep 12th 2016, 7:21 pm
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Default Re: WEP and the SSA

Originally Posted by lansbury View Post
The WEP reduction is limited to one-half of your pension from non-covered employment.

Very bottom of this page https://www.ssa.gov/planners/retire/wep-chart.html
Thanks,
and by 'non covered employment' they mean UK State Pension? or any pension income from a non US SS source?

also on the chart...do you read the years of substantial earnings subject to WEP at your age 62 year? or use the number at the age you actually draw the benefit.

eg: Hit 62 in 1996 but didn't draw benefit at that time and had less than 20 years SS accrued, but continued working and ended up drawing SS in 2026 with 29 years lets say, paid into SS. I'm assuming they have to use the years count that you accrued when you finally wave the white flag (29) and then use the table to look up the WEP deduction based on the year you hit 62?
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Old Sep 12th 2016, 7:25 pm
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Default Re: WEP and the SSA

I just re -read it. The baseline has to be the year you turned 62 and that is your WEP deduction based upon how many years SS you have. It's Monday!
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Old Sep 12th 2016, 7:41 pm
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Default Re: WEP and the SSA

Originally Posted by iceflow View Post
I just re -read it. The baseline has to be the year you turned 62 and that is your WEP deduction based upon how many years SS you have. It's Monday!
The "62" in that advice is wrong (it was discussed a few weeks ago on BE). The applicable date is when you apply for social security, whenever that is - you could be 65, 68, 70, or even older.
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Old Sep 12th 2016, 7:59 pm
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Default Re: WEP and the SSA

Originally Posted by iceflow View Post
I just re -read it. The baseline has to be the year you turned 62 and that is your WEP deduction based upon how many years SS you have. It's Monday!
Originally Posted by Pulaski View Post
The "62" in that advice is wrong (it was discussed a few weeks ago on BE). The applicable date is when you apply for social security, whenever that is - you could be 65, 68, 70, or even older.
Pulaski is right. When Mrs L claimed at 65 they worked her pension out for that age and then deducted the WEP based on the UK pensions she was already receiving. The amount of those was based on the last payment she received, at the then current exchange rate.

Last edited by lansbury; Sep 12th 2016 at 8:29 pm.
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Old Sep 12th 2016, 8:38 pm
  #30  
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Default Re: WEP and the SSA

Originally Posted by lansbury View Post
Pulaski is right. When Mrs L claimed at 65 they worked her pension out for that age and then deducted the WEP based on the UK pensions she was already receiving. The amount of those was based on the last payment she received, at the then current exchange rate.
Very confusing blurb from the SS. It makes it sound like the year you turn 62 will be your baseline WEP numbers as and when you finally apply. I thought it sounded a bit too good to be true.
How To Use The Chart



The chart is easy to use.

  1. Go to the Eligibility Year (ELY) column to find the year you reach age 62 or became totally disabled (if earlier). If your birthday is on January 1st, use the year before you reach age 62.
  2. Go to the column that shows the number of years you paid Social Security tax on substantial earnings. The amount shown is the maximum your benefit can be reduced in your Eligibility Year because of the Windfall Elimination Provision (WEP).
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