WTH... WEP? Really?
 

I am 63, British Ex Pat, lived in the USA 25 years now..
American Citizen now, remarried...

1/ Started my first job at 16, started paying NIC, and I was there 6 years, and when I left I had GBP 920 in the Company Pension scheme A in 1984.
2/ Started my next job in 1984, until 1994, or so, and contributed to the company Pension Scheme B.
3/ Had a few years self employed, and paid into a Self Employment Pension C for a few years.
4/ Moved to the USA, in 1999, got divorced from the UK Ex, and started paying FICA and SS.
5/ Got my 40 quarters in 2010, and qualified for SS.

Now planning, and indeed started Retirement, taking my SS early @62, getting $145,00/pa.

I have 18 years of SS Contributions to date.
Looked up my British State Pension and I have 22 years of NIC and looks like a projected GBP 137/ week, or GBP 7,125/pa when I hit 67.
Pension A is projected at GBP10,000/pa, starting @65.
Due to pension sharing with the Ex(who also lives in the USA now), Pension B, and C only amount to GBP 2,800/PA when I hit 65.

So, I figured I had it all worked out...
Then I found out about this WEP thing a while back, but the SSA test is ambiguous, and I probably did it wrong because It said I was not subject to WEP..

Am I subject to WEP on any/all my UK stuff?
How much?
What happens when my wife takes her SS, and i get spousal benefit?

Re: WTH... WEP? Really?
 

With only 18 years SS contributions you are subject to WEP on all of your UK pensions up to a maximum of $1,174 per month (in 2024, it will increase annually with inflation). They will deduct from your SS 50 cents for every dollar of UK pension received, with a maximum deduction of $587 per month (in 2024). From your numbers you will be WEP’d by the monthly maximum. WEP will start as soon as you receive any UK payments and you are obligated to inform them when that happens. The WEP deduction is calculated once (or each time you start a new payment stream) but because of how they calculate cost of living increases it will effectively inflate each year by the same amount as the increase. Spousal benefits are not subject to WEP unless the spouse themselves was subject to WEP in which case their benefit would be reduced and you would receive half of their reduced benefit. You will receive the higher of your own benefit or half of your spouse’s but not both.

You might want to look at voluntary NI Contributions to boost your UK pension. Any part of the UK pension attributable to voluntary contributions is not subject to WEP. Scroll through this thread for a wealth of information starting from the most recent posts.https://britishexpats.com/forum/usa-...utions-874408/.

WEP can be reduced with 20 or more years of SS contributions, and be eliminated altogether with 30 years. Each year between 20 and 30 reduces the deduction by 10%.

Re: WTH... WEP? Really?
 

Thinks for the clarification.
Ugh.
I had read up on Wep a couple of years back, but thought it didn’t apply.

Re: WTH... WEP? Really?
 

There may be some better news though.

First of all, if you started taking social security at 62 then your WEP deduction will be roughly 70% of what it would have been at full retirement age. In your case that will reduce the WEP to about 70% of the 2024 maximum amount of $587. That is because the WEP deduction is calculated at full retirement age and deducted from the social security due at full retirement age. They then adjust that amount by whatever is required to take into account early or deferred retirement. That has the net result of decreasing WEP by up to 30% if commencing social security at age 62, or increasing it by about 30% if retirement is delayed to age 70, and of course it will be adjusted proportionally at any age in between. Those deferring retirement may find that their WEP adjustment is higher than the maximum WEP applicable in the year they retired, and those retiring before full retirement age may find their WEP is capped out a lower amount than the maximum for that year.

Second, there is a bipartisan bill going through congress that will eliminate WEP. Similar bills have been proposed before and never got enough support to pass. This one has a little more support than in the past, so there is an outside chance it could be brought and passed at some point in the next year or two.

Re: WTH... WEP? Really?
 

I wonder if there will be a lame duck and how effective it might be.

Re: WTH... WEP? Really?
 

As a standalone bill I doubt it will go anywhere, but who knows. I am surprised it made it out of committee. With Trump winning the Presidency there will no doubt be a giant tax negotiation and perhaps it will get rolled into the ensuing tax bill. Either way we can only hope.

Re: WTH... WEP? Really?
 

Thanks for the input.

I had subscribed to updates on the bill, and got this today...

Retirees Call on Speaker Johnson to Bring Social Security Fairness Act to the House Floor
The following statement was issued by Richard Fiesta, Executive Director of the Alliance for Retired Americans, regarding House Freedom Caucus members’ attempts to try to kill the Social Security Fairness Act, H.R. 82:
“Yesterday while Americans were focused on Election Day, two members of the House Freedom Caucus blocked 2.5 million retired public workers or their spouses from receiving the Social Security benefits that they have earned.
“The bill that Reps. Bob Good (R-VA) and Andy Harris (R-MD) tried to kill has more than 300 bipartisan co-sponsors, including House Speaker Mike Johnson. If they thought no one would notice, they were sorely mistaken.
“The members of the Alliance for Retired Americans are calling on Speaker Johnson to bring the Social Security Fairness Act to the floor for a vote this month, as planned. This issue affects millions of Americans, and the bill to restore their benefit deserves an up or down vote on the merits.
“The Social Security Fairness Act, H.R. 82, eliminates the Government Pension Offset (GPO) and Windfall Elimination Provision (WEP), which unfairly reduce Social Security benefits for public sector retirees who receive a public pension — or the spouse or survivor of a Social Security beneficiary — who worked in a job not covered by the Social Security program.
“The WEP and GPO disproportionately affect lower-income workers and women. As a result, many face economic hardship during retirement.”
We will continue to fight for H.R. 82.

Re: WTH... WEP? Really?
 

Correction... $14,500 pa on SS, not $145,000... decimal points make a difference...:lol:

Re: WTH... WEP? Really?
 

Re: WTH... WEP? Really?
 

Thanks for this. The bill is likely dead.

Re: WTH... WEP? Really?
 

That article seemed a little left leaning, blaming the republicans.
it’s all just part of the sausage making that goes on in Washington.
I believe that if Johnson is for it, that’s a big plus, and if there is genuine appetite for resolving the issue, it’s possible.
With teachers, police and firefighters behind it, that’s a powerful force.
We can only hope that it gets passed, or maybe blended in with the SS modification bill that is needed.

Re: WTH... WEP? Really?
 

Would there be any WEP for the period from age 62 (SS) until 67 when UK state pension kicks-in?

Re: WTH... WEP? Really?
 

Hi,
From what Glasgow Girls says, it looks like the bigger private pension A, and the two smaller ones, B and C,that I start getting in 2 years@65 will need to be declared, and will trigger a WEP reduction.
I think they will total $1250/month, so will max out my WEP deduction on their own...
I have friends who are ex Law Enforcement, Fire service, Teachers and railway, and whilst I think its unfair to them, all those pension rights were earned sans SS and FICA payments...
It does seem to me grossly unfair to impose WEP, on monies I earned and saved long before I came to the USA!

But here is a question....
What happens if I take my 25% tax free lump sum up front?
Has anyone done this?...
I've read extensively up on the USA Tax ramifications, and whilst most seem to say its tax free in the UK, but not in the USA...
There are a few that say its tax free in the USA too, due to the Tax Treaties... I dont know.
Any input on that, or a link to anyone who has been thru this?
But what about if I take the 25% Lump sum, and a reduced pension going forward... what does that mean to WEP????

Re: WTH... WEP? Really?
 

No WEP until you are in receipt of overseas pension payments.

Re: WTH... WEP? Really?
 

Unfortunately if you take a pension lump sum amount they pro rate that into the pension you would have received (using their own algorithm) and WEP you on that amount, in addition to the WEP due on the actual regular payments. They will do this even if you take the lump sum prior to starting social security. Bottom line is there is no way to avoid WEP on any kind of pension lump sum unless you forfeit all pension rights before you become eligible to withdraw the pension (which in the case of a UK pension is all but impossible).

It is generally agreed that all UK pension lump sums are taxable in the US, including the 25% amount that is tax free in the UK. However as you point out a small minority disagree. Non US citizens have a fairly clear argument to avoid tax on a lump sum, but US Citizens do not. There is plenty of discussion on this in several recent threads.

Re: WTH... WEP? Really?
 

I can confirm that in practice. My wife’s only foreign pension was the UK OAP and she enjoyed her SS until the day she hit 67 and started drawing her OAP and her SS was immediately reduced through WEP.

Re: WTH... WEP? Really?
 

Ok, thanks for the input everyone!

Re: WTH... WEP? Really?
 

My spouse was a county employee whose salary was outside of Social Security. She also had 16 years of prior earnings under Social Security. She started drawing SS as soon as she was able while working until 68 for the county. WEP kicked only when she started drawing the county pension. I was under the previous rules which allowed me to elect to receive spousal benefit while deferring my own benefit to age 70. My spousal benefit was subject her WEP when it cranked in. That said, I was only subject to WEP for one year before I withdrew the election to take spousal in lieu of my own benefit. (Again the rule I took advantage of was repealed).

Re: WTH... WEP? Really?
 

Thanks guys, I suspect I will set my UK defined contribution pension to coincide with the UK state pension at 67, then take my US SS pension at 62 to get 5 years of no WEP, possibly taking some of my 401k if need-be.

Re the 401k - will the US/UK agreement allow my to treat this like a UK defined contribution and take 25% tax-free?

Re: WTH... WEP? Really?
 

No, it is 100% taxable.

Re: WTH... WEP? Really?
 

Found this...
https://www.congress.gov/bill/118th-.../82/cosponsors

Re: WTH... WEP? Really?
 

Thanks for the first post Glasgow Girl about voluntary contributions to UK state...
I went on my account and can see an amount of GBP 981 that I would need to pay to top up...
Is that what you are talking about?
If so, any way to know what the ROI or Return On Investment would be in terms of increased benefit?

Re: WTH... WEP? Re
 

You can always backfill (or top up) the prior 6 NI years, and pay annually for future NI years (until you reach state retirement age). Most people can top up the years between 2006 and 2016 as well, but that option ends in April 2025. (It may already be too late due to extensive processing times and although they may honor applications made before April, 2025, there is no clear guidance on that).

Backfilling costs £179.40 for each backfilled year if paying Class 2, and £907.40 if paying Class 3. To qualify for Class 2 rates you need to have been employed in the year you are backfilling (overseas employment is fine) otherwise it’s Class 3 rates. Each additional NI year will buy you £6.32 a week for each backfilled year, or £328.64 a year, for every year you collect. The payback period is therefore about 6.5 months at Class 2, or about 33 months at Class 3 rates. So long, as you collect for more than the payback period it’s a pretty good investment for a guaranteed return linked to inflation (at least for now) and clearly the longer you live, the better the return. At Class 2 rates it’s the deal of the century, and even at Class 3 rates is still a very good deal.

Not sure where the £981 figure came from but I would call them and ask. You can apply online https://www.gov.uk/guidance/apply-to...en-abroad-cf83. Apply for Class 2 rates and see what happens. They should charge Class 2 when employed, and Class 3 when not employed. They will require details of employment. A lot of very useful information in this thread, start reading from the most recent comments. https://britishexpats.com/forum/usa-...utions-874408/

Re: WTH... WEP? Really?
 

Wow...
What a gem you are!
So looks like I mixed my numbers up..
I logged on, and did the questionnaire.
Its saying I am eligible for class 2 top ups back to 2006, as I've been employed or self employed here in the USA for most of those years.
But the printout i did, says Class 3 is GBP 824.20 from 2006 to 2020.. then 2020-21 is GBP 795.60, 2021-2022 is GBP 800.80, and 2023-2024 is GBP 907.40.

When you apply, for Class 2 do you have to send a payment?

Re: WTH... WEP? Really?
 

The rates are different for prior years as you have found out. The numbers I quoted are for 2024/25 which ties up with your printout. It’s been a long time since I personally started this process but I believe these days you apply and then get the information required to send a payment. Processing times for applications are currently long. Fairly recently a year or so was not unusual, don’t know the current times but given the deadline of 5 April for paying years 2006 -2016 I would get on this immediately and apply online. When you get authorization send your payment immediately.

From what you said previously it looks as if you have 22 years and therefore since you normally need 35 years to get the full pension you need 13 more years before you attain that. If you were ever contracted out of the state pension you could need up to 42 years to make up for being contracted out. (You could have been contracted out without your knowledge by being part of a company pension scheme). However, if you take what they are projecting per week subtract that from the current full weekly pension of £221.20 (in 2024) and divide by £6.32 (in 2024) that will tell you how many additional years you need. Round up the result to the next whole number.

If you can, I would apply and pay for as many historical years as you can (up to the maximum required for the full state pension). I say that because there is no guarantee that this opportunity will persist into the future given the need to control public spending. I doubt any government will tinker with the pension itself, but removing the ability for non residents to contribute voluntary contributions would be an easy way to cut spending without risking votes.

Re: WTH... WEP? Really?
 

Again, THANK YOU!
I know I was contracted out, but dont know how long...
Looking at my account, it says...

Your State Pension summary

Your forecast is £161.85 a week, £703.76 a month, £8,445.10 a year

You need to continue to contribute National Insurance to reach your forecast

Estimate based on your National Insurance record up to 5 April 2024
£136.57 a week Forecast if you contribute until 5 April 2028
£161.85 a week

You can improve your forecast

You have shortfalls in your National Insurance record that you can fill and make count towards your State Pension.

The most you can increase your forecast to is
£221.20 a week


So, is it 221.20 minus 136.57 which would be 83.63 divided by 6.32 is 13.2
Or is it 221.20 minus 161.85 which would be 59.35 divided by 6.32 is 9.39

Re: WTH... WEP? Really?ou
 

Both! As it stands right now, you need 13.2 more years to reach the full state pension, which means 14 further full NI years since partial years get you nothing. That can be achieved by backfilling 10 years and contributing forward for the remaining 4 years before you reach the state pension age, or backfilling 14 years in which case you are done and should not contribute any further since you won’t get anything. The difference between the two forecasts is simply whether or not you contribute going forward, the amount is exactly 4* £6.32.

Even though you were contracted out, your data suggests that you were at or below average earnings in which case there would be no adjustment to make for being contracted out. If there were an adjustment that would be identified on your forecast as a COPE deduction and would reduce your state pension by that amount, and that is when you would need additional years beyond 35 to attain the full pension.

Re: WTH... WEP? Really?
 

Well, I worked my way through the online application...
Couldn't remember my exact dates, but did the best I could...
Got this confirmation..

HMRC received your application to pay voluntary contributions for periods living or working abroad

Re: WTH... WEP? Really?
 

A quick calculation say every NI class 2 payment of GBP179.40 buys an annual increase of GBP328.64...
If I can pay all 14 years, it would take my UK state pension from a projected GBP7701.64 to GBP11502.40...
If my calculations are correct, that would compensate for any WEP loss!

Re: WTH... WEP? Really?
 

HR-82 PASSED THE HOUSE YESTERDAY!

WE DID IT ! Just heard from our team in DC and they were down right giddy with good cause! House voted down Arrington's bill.



HR 82 PASSED with 325 voting for it, 75 Nays, 1 Present, 1 Absent. Senate vote will roll up next and fast. We will be ready for that also. Never say never!!! This group has accomplished something that did not see the light of day for 44 years!!

Re: WTH... WEP? Really?
 

Re: WTH... WEP? Really?
 

Excellent news. The bill still has to pass in the Senate though which is notoriously slow, and they only have until Dec 20th to do so. They would need to agree to the bill as written without amendment to make that happen which might be a tough call. But definitely hope. Either way we should know the end result soon.

Re: WTH... WEP? Really?
 

Great news!!

I just applied for my SS to start in February next year when I'll be 70 so I am now filled with hope of a possible extra $400/mo if I don't get WEP'ed.

Re: WTH... WEP? Really?
 

Well this is a surprise! I was going to work another 6 months or so because next year i reach 30 years of SS. But i might just hand in my notice today 😁

Re: WTH... WEP? Really?
 

Let’s not count our chickens yet!
So weird that the week I express my concerns about WEP, and how it will impact me, it moved the American government to vote….😊

Re: WTH... WEP? Really?
 

https://www.facebook.com/groups/439205776541073

Seems to be the active FB group about WEP, to quote one of the posters:

I think with 10 years SS I was at max WEP which is a deduction of $587 pcm, which would be a welcome change.

Re: WTH... WEP? Really?
 

Yes, here's me dancing around taking SS at 62 and not taking any UK defined contributions till the UK state pension age of 67, just so I could get 5 years of non-WEP'd SS and I might not have to bother with that at all. Defo won't count my chickens.

Re: WTH... WEP? Really?
 

Re: WTH... WEP? Really?
 

LOL, wise man.

I did post a new thread letting everyone know about the HR-82 news separately, but it was removed by the admin.
Said it was a duplicate..
I thought it was a good idea to have a separate thread, so this news was not buried deep in this thread, that was more of a WEP question...

Re: WTH... WEP? Really?
 

We do not allow duplicate threads/posts, because it is confuses our members.. Also please read our Site Rules. If you have further questions/comments about moderator actions, please PM said moderator. Thanks.

https://britishexpats.com/forum/site...-rules-947443/