WEP Question

Good Afternoon,
I am trying to figure out how much of my future UK pension will be subject to WEP. I will have 20 qualifying years of NI which consist of a few years in the 70's, then an absence of many years while in the US, then back to the UK with Class 3 voluntary payments from 2006 to 2014 (listed in weeks, and not all years have a full 52 weeks of contributions), then Class 2 since. It is my understanding that the class 3 contributions are not counted. Is that correct? Does anyone know the formula to work out the amount of the UK pension that is eligible for WEP? I have tried looking at the guidelines but am getting confused. I only have 19 years of substantial earnings in the US.
Thanks in advance for any guidance.

Unfortunately, there are no easy ways to determine how much WEP will be applied to your US Social Security benefit due to your UK State pension. If  the few years in the 70's were Class 1 contributions due to employment in the UK, and with only 19 years of US SS contributions, there will be some WEP. All voluntary contributions, whether Class 2 or Class 3, will be disregarded for the WEP calculation (so only the Class 1 contributions are a part of the calculation). If there are no other UK employment pensions, the WEP should be a smaller amount.

The only accurate way of determining the amount is to use the following SSA downloaded calculator:
https://www.ssa.gov/OACT/anypia/anypia.html

So much depends on individual records and when the US SS pension will be first taken versus when your ELY occurs (Eligibility Year). The SSA info has progressively become more difficult to decipher.

Just to be clear - your UK pension will not be reduced and is unaffected by WEP. Only the US SS benefit is reduced due to WEP.
 

Wow. Class 2 doesn't count? I assumed it did because on the NI record it only states Class 3 as voluntary. Sadly, I have no idea of the 70's  (the record starts at 1975 but says I have 3 years recored pre 75) but it would have been class 1 as I was not self employed as a teenager!.
Thanks for the help. Unfortunately the detailed calculator won't download on a newer Mac OS.

Wow. Class 2 doesn't count? I assumed it did because on the NI record it only states Class 3 as voluntary.

The key word in my first comment referring to Class 2 was voluntary.

Many UK expats living and working in the US continue to contribute to the UK system via Class 2 NICs. If that was case for you, the contributions are voluntary. (This may come as a shock to some US expats living in the UK who are unable to continue contributions to US SS.    )

If the Class 2 contributions were the result of self employment performed while living in the UK, and the Class 2 contributions were made as part of a UK Self Assessment tax return, then they are obligatory, and will be included in the WEP calculation. The determining factor for the SSA is; if the work had been performed in the US, would FICA have been paid?
 
To be certain, you may want to contact the FBU (Federal Benefits Unit) at the US Embassy in London.
https://uk.usembassy.gov/u-s-citizen-services/federal-benefits/contacting-the-london-federal-benefits-unit/
 

Sadly, I have no idea of the 70's  (the record starts at 1975 but says I have 3 years recored pre 75) but it would have been class 1 as I was not self employed as a teenager!.
Thanks for the help. Unfortunately the detailed calculator won't download on a newer Mac OS.

Some have reported NIC credits were given during times of sixth form or university attendance in the UK.

Thanks for the clarification. I should have been clearer. The Class 2 nics were when self employed in the UK, so obligatory. Thought it was too good to be true. .

Unfortunately the detailed calculator won't download on a newer Mac OS.

The Online WEP calculator might work. It's not nearly as accurate, but may give you a rough idea. Pre-calculations for the monthly amount of the UK pension will be required.

https://www.ssa.gov/planners/retire/anyPiaWepjs04.html

Thanks for your help. Yes, I've used the online calculator but wasn't sure how to calculate the amount of my pension that was subject to WEP.  Finally found the official calculation and my own calculation was only a few dollars off. Here it is if anyone else is looking for it. It's not as difficult as it seems at first glance.

"E. Procedure - prorating a foreign pension
When it has been determined that a foreign pension is based in part on noncovered earnings and in part on a payment which may not be used to apply WEP (see GN 00307.290C.5.), prorate the foreign pension in order to obtain only that part based on noncovered earnings. Prorate the pension as follows:
multiply the total pension amount (after converting it from a weekly amount to a monthly amount, if necessary) by the ratio of the number of months of noncovered work over the total number of months used in the computation; therefore
multiply the pension amount by the total number of months of noncovered work after 1956, and
 
divide this number by the total number of months used by the foreign country to compute the pension, based on both noncovered work and the pension payment which may not be used to apply WEP.
EXAMPLE: A worker is entitled to a German pension of 400 deutsch marks (DM) based on periods of employment and voluntary contributions in Germany from January 1951 through December 1970 (a total of 240 months). He made voluntary contributions to the German pension plan from January 1968 through December 1970 (a total of 36 months).
Exclude months before 1957, since the WEP Guarantee applies only to noncovered earnings after 1956. This yields 168 months.
Exclude the 36 months from 1968 through 1970 for which the worker made only voluntary contributions; i.e., he did not work in noncovered employment. This leaves 132 months during which the worker actually worked in noncovered employment after 1956.
Multiply 400DM 132/240; i.e., 400DM 132 months = 52,800 divided by 240 months = 220DM. Therefore, for purposes of the WEP Guarantee provision (see GN 00307.290F.), the worker's foreign pension is 220DM.
Treat any month for which there are both noncovered earnings and one of the non-usable payments above (e.g., a month for which voluntary contributions were made) as a month of noncovered earnings."[/b]

Yes, I've used the online calculator but wasn't sure how to calculate the amount of my pension that was subject to WEP.  Finally found the official calculation and my own calculation was only a few dollars off. Here it is if anyone else is looking for it. It's not as difficult as it seems at first glance.

Well done, Clare. Yes, SSA, as well as the IRS, love their apportionment.

For those who may be considering applying for SS and wonder what this is all about, a 'pencil and paper' estimate using info on the SSA site gives a roughly accurate figure if one is applying precisely at their 'full retirement age (66/67?). An accurate record of substantial qualifying years is required. First, partial voluntary contributions to non-covered pensions require the pre-calculations for apportionment, as Clare has done. If one is considering applying at ELY or any point before full retirement age (62 and upwards), or, delaying receipt of the benefit past full retirement age (FRA to 80), then one of the calculators should be used for reasonable accuracy. Although always present in the past. a more detailed explanation of this has caused the difficulty with interpreting the SSA WEP site.

Ten qualifying years are required to receive a US SS retirement benefit, but if one has 1.5 years, the US/UK Totalisation agreement may allow a UK State pension to help with qualification, but the benefit remains based on actual years of contributions. Below 20 qualifying years will mean WEP at 50%, 30+ qualifying years does away with WEP altogether. The % of WEP deduction varies between 21 and 29 qualifying years.