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WEP and UK pension

WEP and UK pension

Old Nov 10th 2023, 1:38 pm
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Default WEP and UK pension

I already receive my UK State pension, about 90% based on voluntary contributions.
When I apply for my Social Security in a year, does the SSA "look back" at Uk pension already received in their WEP calculation?
I know I am subject to some WEP as I do not have 30 years of qualified income in the USA.
Also, is the amount of WEP constantly updated as UK pension gets cost of living increase?
And when is the exchange rate calculated?
Finally, how transparent is SSA about this and has anyone ever contested their WEP or asked for details? Does it help to meet with someone in person?
Thanks for any input on this
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Old Nov 10th 2023, 1:56 pm
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Default Re: WEP and UK pension

When my wife applied for SS about 3 years ago she did so through the US embassy in London as we are currently resident in England, and she did speak to a very knowledgeable person about WEP who knew about the OAP and voluntary contributions. He told her to complete the following form, which does have a section on voluntary contributions.
Her SS payments were then reduced accordingly. I did make a copy of her NI contributions from her online account, and some of her years were credited due to her being a stay at home spouse with young children, and it was quite clear which years were credited due to her paying NI contributions through work. I did keep a copy of this as proof but the guy from the FBU at the embassy said that they would get the details themselves from DWP.

https://www.ssa.gov/forms/ssa-308.pdf

WEP is a one-off reduction I believe and does not increase as the OAP increases.

Best of luck in your application.
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Old Nov 10th 2023, 6:45 pm
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Default Re: WEP and UK pension

WEP starts when you receive SS. They typically won’t look back at any overseas pensions received before that date (including the UK pension) although if you took a lump sum in lieu of a pension they could WEP you on what they consider the pension amount would have been going forward. You might want to do a trial run at completing the SS application form to determine if that applies. If you took any lump sum before reaching retirement age for that particular pension then you escape that one.

The WEP adjustment is a one time calculation performed and deducted from SS when it is first received. That initial social security amount will increase each year in line with cost of living adjustments, COLA, regardless of how much your overseas pensions increase. That is the good news and is all that most will notice or care about.

The (minor) bad news is that for anyone thinking that inflation will reduce the impact of WEP over time (because it is calculated only once), it won’t, and that is because WEP reduces your initial SS amount and that reduced amount is what is adjusted annually for COLA effectively increasing the WEP dollar deduction by the COLA percentage.

Is the calculation transparent? I am sure you can ask for and receive an explanation but the explanation may not be in layman’s terms. If your only overseas income is the UK state pension and you have access to your NI record then it should be a fairly straightforward calculation to determine the proportion of the pension subject to WEP, and you could then use the WEP calculator in conjunction with your SS forecast to determine what you should get, and compare that to what they finally come up with. Argue then, if necessary, https://www.ssa.gov/benefits/retirem...iaWepjs04.html

An example that may clarify the above.

A and B both claim SS at the same time, both entitled to $1,500. A has no WEP deduction, B has a WEP deduction of $500, resulting in paid SS of $1,000. Next years COLA is 10%, calculated on the previous years paid SS amount. A receives a $150 increase and a new SS of $1,650. B receives a $100 increase, and a new SS of $1,100. The difference between the two due to the initial WEP deduction is now $550 versus $500. In effect the WEP deduction has grown by 10%, the same as COLA. The same scenario will play out year over year meaning that the initial WEP dollar deduction will always increase in line with COLA. B subsequently receives an increase in overseas pensions of $100, however because the WEP calculation was a one time deduction made to the initial SS payment it has no impact to SS.

If they calculated COLA adjustments prior to the WEP deduction then A and B would receive the same increase, and the WEP deduction would remain at $500 forever and so inflation would reduce the impact. Unfortunately, that is not how they do it.


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Old Nov 10th 2023, 10:01 pm
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Default Re: WEP and UK pension

Thanks for both of these quick answers and useful links! So much to learn!
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Old Nov 14th 2023, 3:54 am
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Default Re: WEP and UK pension

"The WEP adjustment is a one time calculation performed and deducted from SS when it is first received."
So, if I claim SS before any other pension how does this work? Would they (and how) consider future pension income?
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Old Nov 14th 2023, 7:23 am
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Default Re: WEP and UK pension

Originally Posted by ckusa
"The WEP adjustment is a one time calculation performed and deducted from SS when it is first received."
So, if I claim SS before any other pension how does this work? Would they (and how) consider future pension income?
My wife was asked if she had any future income, and then when she started receiving her OAP she reported how much and WEP was applied at that time.

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Old Nov 14th 2023, 9:55 am
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Default Re: WEP and UK pension

Thanks durhamlad - that makes sense, so I guess it might be advantageous to start claiming SS first and to defer other pension income.
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Old Nov 14th 2023, 10:32 am
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Default Re: WEP and UK pension

Originally Posted by ckusa
Thanks durhamlad - that makes sense, so I guess it might be advantageous to start claiming SS first and to defer other pension income.
That is what I would do.

Now that I am back at by computer I can provide a bit more detail.

Once she actually started receiving her OAP she contacted them again and had filled out form SSA-308 (below) and this form contains the dates for which she paid voluntary contributions as they don't count towards the WEP calculation. Her SS payments were then reduced accordingly. These days it is a simple calculation as 35 years equals the full OAP so for example 7 years of voluntary contributions would reduce the amount of OAP used in the WEP calculation by 1/5th
https://www.ssa.gov/forms/ssa-308.pdf

Last edited by durham_lad; Nov 14th 2023 at 10:35 am.
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Old Nov 14th 2023, 3:33 pm
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Default Re: WEP and UK pension

Hi - perfect: I won't need it for a couple of years, so I'll stash it in 'return to UK' folder so it's ready!
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Old Nov 14th 2023, 9:31 pm
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Default Re: WEP and UK pension

Originally Posted by durham_lad
That is what I would do.

Now that I am back at by computer I can provide a bit more detail.

Once she actually started receiving her OAP she contacted them again and had filled out form SSA-308 (below) and this form contains the dates for which she paid voluntary contributions as they don't count towards the WEP calculation. Her SS payments were then reduced accordingly. These days it is a simple calculation as 35 years equals the full OAP so for example 7 years of voluntary contributions would reduce the amount of OAP used in the WEP calculation by 1/5th
https://www.ssa.gov/forms/ssa-308.pdf
That is also what I am going to do, but beware that if you defer income after your eligibility date for that income they can impute what the income would have been had you not deferred it and WEP you on that amount even though you may not actually be receiving it. For example, if you defer the UK pension until age 70, they are allowed to start WEP on the amount you would have received at your normal retirement age. Whether they will or not is dependent upon how your application is processed, partly determined by how the rules are applied by the individual working your case and the information available to them.
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