Q about getting both UK and US pensions

I have applied for my UK pension and am about to apply for SS.  I read something I don't quite understand about an agreement between the US and UK pension schemes which says getting a foreign (UK) pension can affect how my SS is calculated. 

This is making me worry that I won't get my full SS.  I know I'll find out very shortly when I have my phone appointment, but just wondering if anyone knows about this?

I'm sorry to say your fears are well founded. Your US SS will be reduced due to the UK State Pension, or any other UK (foreign) pension you may have (some US pensions can also cause a reduction). The culprit is called WEP (Windfall Elimination Provision).

http://www.socialsecurity.gov/pubs/EN-05-10045.pdf

http://www.socialsecurity.gov/retire2/wep.htm

There is a calculator available which will give you an idea of the amount your US SS will be reduced.

http://www.socialsecurity.gov/OACT/anypia/anypia.html

You will have to download the calculator to your computer to activate it.

There is also an online version for WEP:

http://www.socialsecurity.gov/retire2/anyPiaWepjs04.htm

Note: as durham-lad points out, if you have 30 or more years of US qualifying years of substantial earnings to US SS, WEP will no longer apply.

I believe that the UK OAP will be taking into account as part of the US SS Windfall Elimination Process (WEP).

If you earn a pension from work where you did not pay into the US SS system, and you have fewer than 35 years of contributions into the US system, then your US SS is reduced a little.

For myself, I will be receiving 2 small UK private pensions plus the UK OAP and I had only 23 years of contributions into the US system before I stopped work.  I expect my US SS to be reduced by about $400/month when I start collecting.

You can read more here

http://www.ssa.gov/retire2/wep.htm

If you work for a federal, state or local government agency, a nonprofit organization or in another country, you may be eligible for a pension based on earnings not covered by Social Security.

A pension based on earnings not covered by Social Security can affect the amount of your Social Security benefit. We do not know whether you are eligible for such a pension, so the benefit estimates you have received may not have been adjusted for such a possibility.

Our Windfall Elimination Provision fact sheet explains whether you might be affected.
How WEP Can Affect Your Benefit

If you think your pension will affect your Social Security benefit, you can

    Look at our WEP chart to see how WEP affects Social Security benefits.
    Use our WEP Online Calculator or download our Detailed Calculator to see how your benefit may be reduced by WEP.

 

It's cold comfort, but depending on how many years you worked in the UK, by virtue of the Totalization Agreement, you might also get something (v. little) from the UK state pension. You'd need to check with the International Division - it's somewhere up north as I recall

If you have at least 30 (not 35 as state above) years of substantial SS earnings in the US you will not be subject to WEP.

Also if any of your foreign pensions are not due to foreign earnings then they won't count towards the WEP calculation. For example, while at sixth form college in the UK I received 3 years of National Insurance Contributions (NIC) and I also have 27 years of voluntary Class 2 NICs that I have paid with money earned in the US. Hence, none on my UK state pension will be included in any WEP calculation.

If you have at least 30 (not 35 as state above) years of substantial SS earnings in the US you will not be subject to WEP.

Also if any of your foreign pensions are not due to foreign earnings then they won't count towards the WEP calculation. For example, while at sixth form college in the UK I received 3 years of National Insurance Contributions (NIC) and I also have 27 years of voluntary Class 2 NICs that I have paid with money earned in the US. Hence, none on my UK state pension will be included in any WEP calculation.

Thanks for the correction on the number of years.  Interesting about the UK pension.  By the time I begin receiving my UK pension it will be almost 50/50 UK work contributions and voluntary contributions while in the USA.  Can you discount the amount of the pension for purposes of WEP like this?  It won't matter in my case as my UK private pensions will already take me to the max, but from an intellectual standpoint I'm interested.

Thanks for the correction on the number of years.  Interesting about the UK pension.  By the time I begin receiving my UK pension it will be almost 50/50 UK work contributions and voluntary contributions while in the USA.  Can you discount the amount of the pension for purposes of WEP like this?  It won't matter in my case as my UK private pensions will already take me to the max, but from an intellectual standpoint I'm interested.

Yes you can discount the amount declared for WEP like that. As a practical matter I will get WEPed, not because of my UK pension, but because of my Massachusetts state pension.

FYI there is some legislation being proposed to end WEP.

Argghh.  Here I was totalling up all the extra money we were going to have for holidays!

I have applied for my UK pension (6 years but they also added in more to mine based on my husband getting a full pension) so it's a nice sum.  I will start receiving it in January.

I will apply for SS in a couple of weeks by telephone interview with the office in London.  I worked in the US for 20 years but never made a huge amount.  I get a TN state pension from working there for just under 10 years.  I guess they'll count that as well?  Ugh.

The calculator says I'll get nearly 300 less than I was expecting in SS if I count TN and UK pensions.   

Thanks for all your help!

It's cold comfort, but depending on how many years you worked in the UK, by virtue of the Totalization Agreement, you might also get something (v. little) from the UK state pension. You'd need to check with the International Division - it's somewhere up north as I recall

I recently applied for my UK pension by phone.  Worked here 6 years.  But because my dh gets a full UK pension I get more based on his (don't know how this works as he still gets the full UK pension as well).  Anyway, I'm getting £74/week.

Recalculated using the online WEP calculator (couldn't figure out the calculator I installed).  I calculated my UK pension as the equivalent of $ by 1.57.  So it looks like I should be getting about $282 less per month that expected.  The rules say they can't take more than 1/2 my normal SS amount.

Does anyone know if my dh who is UK citizen only is eligible to receive SS survivor benefits?  I qualify for survivor benefits and it says spouse would get the benefits.  

When I applied for my TN state pension I was asked if I wanted survivor benefits but that if I didn't I'd get a larger amount.  So I took the larger amount as it wasn't huge anyway.  Wonder if it works the same way for SS.

Does anyone know if my dh who is UK citizen only is eligible to receive SS survivor benefits?  I qualify for survivor benefits and it says spouse would get the benefits.  

Quite possibly. In the past, thanks to the Totalisation Agreement, a US Citizen who qualified for SS on their contribution record (10 years or 40 quarters of substantial earnings) would also allow their non-US spouse (if resident in the UK) to qualify for an additional US SS pension equal to 50% of the qualified individuals SS benefit.

The SS web site has been 'modernised' recently, and the location of useful information is now harder to find, so I don't know if this has changed.

When you have your telephone interview, the person you talk to may offer the information on the availability of a spouse pension (they did in the past). If they don't, ask the question! 

Recalculated using the online WEP calculator (couldn't figure out the calculator I installed).  I calculated my UK pension as the equivalent of $ by 1.57.

When I file my IRS taxes I use their official average exchange rate on their website as it is in my favor when converting £ to $ for my UK pension.

http://www.irs.gov/Individuals/International-Taxpayers/Yearly-Average-Currency-Exchange-Rates

For 2012 the official rate was 1.52, but they don't have a figure for 2013 yet.  Not sure if it will make much of a difference in the WEP calculation.

Using XE.com I track the rate on the 1st of each month, so at very least you can use 1.55 in your calculation for 2013, but I'm sure the IRS figure will come in lower because in 2012 using the XE.com data I got an average of 1.59 compared to the IRS official figure of 1.52

2013 XE.com rates on the 1st of the month.
Month    Rate
Jan    1.623
Feb    1.572
Mar    1.503
Apr   1.501
May   1.557
Jun   1.519
Jul   1.525
Aug   1.514
Sep   1.55
Oct   1.624
Nov   1.598   
   
Avg rate   1.553

The exchange rate for the day the SS benefit is approved, and not necessarily the day of the interview, will be the exchange rate used for the WEP calculation to determine the pension. That amount becomes your official starting US SS amount in US$'s, and as the official starting amount, it is not altered. Your SS pension, with the official amount for the first year, will be increased yearly (COLA) by the inflation index, and is adjusted for inflation on (each) previous years' amount (if that makes sense), and is always in US$'s. The actual monthly payments then use that US$ amount for that year, and convert it to £'s using the prevailing exchange rate on the day of the payment (usually the 1st to 3rd of the month). Therefore, an amount you receive in one month (in £'s) will usually be different in the following months as the exchange rate varies.

Thanks!  So I could get different amount each month depending on the exchange rate?  Well, at least it doesn't normally vary too much.

Update:

I got a call to arrange my over-the-phone SS application. I asked about the reduction in my SS due to getting a UK pension, and she said yes.  Also asked if getting a state university pension from the US would reduce it as well.  Apparently you can opt out of paying into SS if you work for the government.  But I did not. In fact, the bulk of my payments into SS will be from this job.  So, good news.  WEP calculator puts the total back up to $427.  Not huge but more than the $270 I was expecting.

Big surprise:  my dh who has never lived or worked in US is eligible for SS based on me.  You have to married more than 10 years to get it.  He will have to be interviewed on the phone as well and will also have to get a SS number.  Unexpected income is always nice.  Just hoping his UK pensions don't count against him.