Social Security for Americans working in UK

We are getting ready to move from US to UK. My husband will be working for a UK branch of an American co and was told he would pay UK taxes (which I heard is aboyt 40% - yikes!) He already has enough credits (years of employment) to qualify for US social security when he retires. We expect to be in the UK for 4-6 years. What happens when he retires? Will he get one check from US social security and one from UK? Would combined amount of benefits be comparable to if he stayed in US? We just want to know how big a "hit" (if any) we'll take in making this move. Thanks!

We are getting ready to move from US to UK. My husband will be working for a UK branch of an American co and was told he would pay UK taxes (which I heard is aboyt 40% - yikes!)

For the 2013/14 tax year, if his taxable income is more than £41,450 a year, he will be in the 40% tax bracket (or, £32,010 after the personal allowance of £9,440). If it's over £150,000, it will be at 45%.

https://www.gov.uk/income-tax-rates

He already has enough credits (years of employment) to qualify for US social security when he retires. We expect to be in the UK for 4-6 years. What happens when he retires? Will he get one check from US social security and one from UK? Would combined amount of benefits be comparable to if he stayed in US? We just want to know how big a "hit" (if any) we'll take in making this move. Thanks!

You've given an interesting range for the possible time you may stay in the UK. For an American, employed by an American company, and sent to work for a UK operations of that company, a 5 year cut off becomes critical. If it's less than 5 years, he may be able to retain US Social Security (and his contributions will continue towards it). If it's planned to be over 5 years, he will contribute to the UK NI (National Insurance), and not US SS. See the following:

http://www.ssa.gov/international/Agreement_Pamphlets/uk.html

If it's over 5 years and/or he does not contribute to US SS, then yes, he will be entitled to both US SS (for which he is already qualified) and the UK State Pension (which he will qualify for by the agreement). Both would be paid separately. If he could, it may be more profitable to stay in the US SS by limiting the stay to less than 5 years.

WEP would be a factor in his US SS if, at the time of retirement, he would have less than 30 years of substantial contributions to US SS and is in reciept of a UK State Pension. WEP would reduce his US SS benefit. Another reason to consider a stay of less than 5 years.

Of course, it's only money, and a longer time spent in the UK may be worth it, especially if it enhances his position in the company. Be sure to check the US tax implications if his personal/company pension is transferred to a UK pension (more WEP implications as well).  

On re-reading your post, and to be clear:
If he is Already employed by the US company, and is seconded to the UK branch for 4 to 5 years, then the above would apply.
If he is not already employed by the US company, and is hired in the UK by the American company, then he would pay UK NI from day 1.

We are getting ready to move from US to UK. My husband will be working for a UK branch of an American co and was told he would pay UK taxes (which I heard is aboyt 40% - yikes!) He already has enough credits (years of employment) to qualify for US social security when he retires. We expect to be in the UK for 4-6 years. What happens when he retires? Will he get one check from US social security and one from UK? Would combined amount of benefits be comparable to if he stayed in US? We just want to know how big a "hit" (if any) we'll take in making this move. Thanks!

As theOAP says 5 years is the cut off fora US employee working for a US company in the UK to ce excluded from NI and pay FICA. It sounds as if you intend to return to the US after your 4-6 years are up. If so I'd recommend that you apply to keep paying US FICA payments and to be excluded from UK NI. That way you will continue to grow your US SS benefit and won't have to deal with the tax complications and WEP for a small UK state pension from 5 years of NI contributions.

You'll have to pay UK tax on any UK source income and a US citizen is also liable to US tax on worldwide income. The rules of UK tax residency are currently changing so as part of your relocation package I would ask your husband's company to pay for a US/UK dual qualified tax professional to help you with your taxes. Things to consider are the ownership of things like US mutual funds and how they will be taxed in the UK as well as income and payroll taxes.

Your husband should talk to your human resources/payroll department about the FICA/NI issue and get a certificate of coverage if necessary.

Be sure to check the US tax implications if his personal/company pension is transferred to a UK pension (more WEP implications as well).  

Money from US 401ks etc cannot be transferred to a UK pension.

The OP should try to stay within the US company 401k etc pension arrangements and contribute to them as outlined in the treaty. Dealing with a UK company pension as a US citizen can be a pain in the neck. This is another area where the OP should get advice form the company and also get them to pay for professional advice.

On re-reading your post, and to be clear:
If he is Already employed by the US company, and is seconded to the UK branch for 4 to 5 years, then the above would apply.
If he is not already employed by the US company, and is hired in the UK by the American company, then he would pay UK NI from day 1.

+1

Nun, I've just noticed something. When I called up the SS Totalization Agreement, I noticed the format had changed. But it's not only the format, the warning/info on WEP has been removed.

To the OP:
WEP is the Windfall Elimination Provision., which is used if there is pension income from wages earned outside of the US (like a UK company pension or the UK State Pension).

Here is the WEP page on the US SS site.
http://www.socialsecurity.gov/retire2/wep.htm

Nun, I've just noticed something. When I called up the SS Totalization Agreement, I noticed the format had changed. But it's not only the format, the warning/info on WEP has been removed.

To the OP:
WEP is the Windfall Elimination Provision., which is used if there is pension income from wages earned outside of the US (like a UK company pension or the UK State Pension).

Here is the WEP page on the US SS site.
http://www.socialsecurity.gov/retire2/wep.htm

It's sad that you noticed and that I'm interested

I sent a letter to my local SS office informing them of my UK state pension (which started this year) asking how this would effect my SS benefit but have never received a reply from them!