USA Pension for Expat in UK

Hi, going to try to keep this simple! :-)

I am an American living in the UK for 35 years now.  I have both an American and British passport.  I am 60 so pension age is creeping up.  I have no private pensions, but will be expecting the standard UK State Pension at 66.  I lived and worked in the USA for over 10 years prior to coming to the UK and have amassed a pension there too.  I have already done a pension forecast on-line for the USA pension and know what the calculation is.  My question is, is this calculation likely to be affected or modified at all by the amount I will be receiving from the UK state pension?  Is there perhaps a 'ceiling' on what I can receive jointly, in which case the USA pension could be reduced to reflect that?  Any help would be greatly appreciated, thanks!

Actually having done further research on this subject, it seems, if I understand it properly, that your final US pension (if you have been living and working abroad at some point) could be reduced because of the 'Windfall Elimination Provision'?  Just wondering if that makes any sense to anyone?  Thanks.

Hiya. Are you talking about a private US pension, or US Social Security pension?

I'm talking about the US Social Security pension.  I have no private pensions.  When I turn 66 (or 62 if I choose), I can start taking my UK state pension (I've been here since 1985), and I will also be entitled to the US SS pension at the same time.  But I only worked in the USA for about 13 years so I 'think' I may be affected by the 'Windfall Elimination Provision'?

The answer, I believe, is "yes your USS SS will be reduced by having a UK OAP".

If you have no part of your UK OAP funded by voluntary national insurance contributions then all of your OAP will be used in the WEP calculation to reduce your SS.

Thank you for your response!  I wasn't sure exactly what you meant by: "If you have no part of your UK OAP funded by voluntary national insurance contributions..."

Part of my employment here in the UK has been PAYE so NI contributions would have been at source, and then the other part would have been self-employed work, where I made the contributions myself, separately...

Thank you for your response!  I wasn't sure exactly what you meant by: "If you have no part of your UK OAP funded by voluntary national insurance contributions..."

Part of my employment here in the UK has been PAYE so NI contributions would have been at source, and then the other part would have been self-employed work, where I made the contributions myself, separately...

The contributions you made while self employed are still from earned income. If you had made voluntary contributions while working in the USA then those would have been from the after tax earnings of your US employment, similar to paying into an annuity.

WEP applies to pensions such as the OAP that came from earned income that was not subject to US payroll taxes (aka FICA)

I see!  I never knew about WEP til today, after all these years!  Just wondering out of interest... How do you think the USA justifies WEP?  I mean, if you pay X amount into Social Security, why doesn't one just simply receive a pension based on their total contributions at the date of retirement?  Don't worry about answering, you've already kindly answered my question... I was just wondering, that's all! :-)

Oh, and I'm wondering if it would make financial sense to take my US pension at 62 (at a somewhat reduced rate of course) for 4 years, and then take the UK one at 66!  That way I would presumably be able to receive the full US pension amount for 4 years, which would later reduce when my UK pension kicks in?  I realise that I probably won't be able to be certain about that until the time comes, but obviously one likes to plan one's retirement as much as poss!  Ta!

Oh, and I'm wondering if it would make financial sense to take my US pension at 62 (at a somewhat reduced rate of course) for 4 years, and then take the UK one at 66!  That way I would presumably be able to receive the full US pension amount for 4 years, which would later reduce when my UK pension kicks in?  I realise that I probably won't be able to be certain about that until the time comes, but obviously one likes to plan one's retirement as much as poss!  Ta!

I think that makes sense.

Thanks for all your help! 

I see!  I never knew about WEP til today, after all these years!  Just wondering out of interest... How do you think the USA justifies WEP?  I mean, if you pay X amount into Social Security, why doesn't one just simply receive a pension based on their total contributions at the date of retirement?  Don't worry about answering, you've already kindly answered my question... I was just wondering, that's all! :-)

If it makes you feel any better (and no idea why it would), if you contribute for 40 years into US Social Security and take early retirement at, say, 62, if you move overseas and take a job you will lose your monthly social security payments entirely if you work more than 40 hours a month. The payments will start back up when you are of full SS age, but one would think that if one worked for decades and earned a benefit it would "belong" to you regardless of where you live and what you do.

SSA disagrees.   

If you were living in the USA you could work in early retirement, but would lose $1 for every $2 earned over $1,470 per month. Once you reach full SS retirement age, you can work as much as you'd like and there is no penalty.

Interesting info thanks!  This sort of information isn't easy to come across.  Just out of interest do retirees in the US have to pay taxes on their SS pensions if they go over a certain amount, like we do here (if the amount goes over your annual tax allowance)?

What I AM wondering is what is the best way to 'receive' one's SS pension over here?  Is it better to open an American bank account, and the money stays as dollars until you make a withdrawal?  Or just to get it sent straight into your UK account?  There may be conversion charges if you do the latter, in fact that may be the case either way!

Interesting info thanks!  This sort of information isn't easy to come across.  Just out of interest do retirees in the US have to pay taxes on their SS pensions if they go over a certain amount, like we do here (if the amount goes over your annual tax allowance)?

What I AM wondering is what is the best way to 'receive' one's SS pension over here?  Is it better to open an American bank account, and the money stays as dollars until you make a withdrawal?  Or just to get it sent straight into your UK account?  There may be conversion charges if you do the latter, in fact that may be the case either way!

Yes, Residents of the USA pay taxes on SS depending on their income but it is more complicated in that if their income is low enough they will pay no taxes on it and if their income is high enough they will pay income tax on a maximum of 85% of their SS. For example if your SS is $1,000/month and your income is high then you would pay income tax on $850 of that SS

US or UK bank is really up to you.

Interesting info thanks!  This sort of information isn't easy to come across.  Just out of interest do retirees in the US have to pay taxes on their SS pensions if they go over a certain amount, like we do here (if the amount goes over your annual tax allowance)?

What I AM wondering is what is the best way to 'receive' one's SS pension over here?  Is it better to open an American bank account, and the money stays as dollars until you make a withdrawal?  Or just to get it sent straight into your UK account?  There may be conversion charges if you do the latter, in fact that may be the case either way!

Hi. If you live in the USA, your SS is taxed:

If your total income is more than $25,000 for an individual or $32,000 for a married couple filing jointly, you must pay income taxes on your Social Security benefits. Below those thresholds, your benefits are not taxed. That applies to spousal, survivor and disability benefits as well as retirement benefits.  The portion of your benefits subject to taxation varies with income level. You’ll be taxed on:

    up to 50 percent of your benefits if your income is $25,000 to $34,000 for an individual or $32,000 to $44,000 for a married couple filing jointly.
    up to 85 percent of your benefits if your income is more than $34,000 (individual) or $44,000 (couple).

Say you file individually, have $50,000 in income and get $1,500 a month from Social Security. You would pay taxes on 85 percent of your $18,000 in annual benefits, or $15,300. Nobody pays taxes on more than 85 percent of their Social Security benefits, no matter their income. For purposes of determining how the Internal Revenue Service treats your Social Security payments, “income” means your adjusted gross income plus nontaxable interest income plus half of your Social Security benefits.  All of the above concerns federal taxes; 13 states also tax Social Security to varying degrees. If you live in Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, North Dakota, Vermont, Utah or West Virginia, contact your state tax agency for details on how benefits are taxed.  from https://www.aarp.org/retirement/social-security/questions-answers/how-is-ss-taxed.html

As an aside, if you have US social security and are not a UK national, but live in the UK as a USC, your SS is not taxable in the USA, only in the UK.

I have my SS direct debited into my UK bank account. I get an excellent exchange rate, and I know precisely what to list on my HMRC income tax forms when I have to do my self-assessment (no messing around with calculating exchange rates, etc.). It arrives promptly on the 3rd of the month (unless that date falls on a weekend, when it arrives the Friday prior, funneled through the Bank of Ireland.