Delaying UK pension / WEP

I understand that if you defers your UK pension, you get can 5.8% per year more for each year deferred. When you do decide to take it then you can either get an increased weekly pension, or you can take it in a lump sum. So if you delay 4 years, you would get a lump sum of 4 X 168 X 52 = 34,944. A nice chunk.

Now - for someone like me who will be hit by the full amount of WEP - I have avoided WEP on US pension for 4 years. My WEP based on 22 years of US contributions is $420 odd dollars per month. If I have this right I will have just saved  $20K in WEP payments.

I'm sure I have overlooked something here - who's going to burst my bubble? I wonder how the lump sum would affect WEP, if at all? Do I just incur WEP when I start taking it at say 70?

I understand that if you defers your UK pension, you get can 5.8% per year more for each year deferred. When you do decide to take it then you can either get an increased weekly pension, or you can take it in a lump sum. So if you delay 4 years, you would get a lump sum of 4 X 168 X 52 = 34,944. A nice chunk.

You may be correct (no bubbles burst), but it may be worth while to check with the pension people to be sure you have this right. The formula above for the lump sum may be 4 X £9.74 X 52, depending on how you read the gov.uk page. It all depends on the definition of "extra State Pension".
https://www.gov.uk/deferring-state-pension/what-you-get

Now - for someone like me who will be hit by the full amount of WEP - I have avoided WEP on US pension for 4 years. My WEP based on 22 years of US contributions is $420 odd dollars per month. If I have this right I will have just saved  $20K in WEP payments.

Correct, this plus increased monthly payments is the prime reason for delaying a WEPed foreign pension.

For reference, WEP figures depend on taking SS at FRA (full retirement age). If SS is taken early, the WEP amount is reduced. If it is taken past FRA (70 for example) the WEP amount will increase.

"Delaying retirement increase(s) the reduction for WEP".
https://www.ssa.gov/planners/retire/wep.html

  I wonder how the lump sum would affect WEP, if at all?

If I remember correctly, one question asked when applying for SS in relation to foreign pensions is "was/is there a lump sum involved?" Those who have applied more recently may have better knowledge.

It is a good question and I'll be interested in seeing the responses. Academic for me as I am already drawing UK private pensions which will WEP me to the max when I start drawing SS.

I plan on taking my OAP on time at age 66.  I've already done the spreadsheet calculation and the increased OAP is too long a payback for my liking. (I also will only have OAP based on 30 years)

If it's a private pension, to which you contributed after tax dollars, are you sure it will be WEPed? What does this say:

https://www.ssa.gov/international/wep1.html

I just did it a got a no RE my private pension, I think.

1. yes
2. no
3. no
4. no
5. yes or no makes no difference
6. no
7. no
8. yes - I think this is the key - the question is : "Do you, or will you, receive a foreign pension because of need, voluntary contributions, citizenship, or residency that is based in part on your earnings?" - with a private pension we made voluntary contributions and they were based in part on earnings - we are only allowed to contribute up to our earnings amount, or some other cap, no?

If you have 30 years then does not that eliminate WEP? Is it only your private pension you are worried about?

A

If it's a private pension, to which you contributed after tax dollars, are you sure it will be WEPed? What does this say:

https://www.ssa.gov/international/wep1.html

I just did it a got a no RE my private pension, I think.

1. yes
2. no
3. no
4. no
5. yes or no makes no difference
6. no
7. no
8. yes - I think this is the key - the question is : "Do you, or will you, receive a foreign pension because of need, voluntary contributions, citizenship, or residency that is based in part on your earnings?" - with a private pension we made voluntary contributions and they were based in part on earnings - we are only allowed to contribute up to our earnings amount, or some other cap, no?

If you have 30 years then does not that eliminate WEP? Is it only your private pension you are worried about?

A

I agree. It would however be unusual for a private pension to have only after tax contributions.

If you have 20 years of SS contributions then the level of WEP decreases until it zeros out at 30 years.

Well for anyone interested, I burst my own bubble. Taking a lump sum for a delayed UK pension is not an option these days - it was an option if you qualified for a pension a good few years ago - don't remember the dates.

@Art - I don't know if you ever got an answer on your last post here about the dates that apply for getting a lump sum for delaying your UK state pension?

The answer is here:

https://www.gov.uk/deferring-state-pension/what-you-get

Actual date was April 6th 2016 - so not that long ago, especially as you said you delayed WEP for 4 years when you posted in October 2019? - bottom line - if you were over the age of 65 on April 6th 2016 then you can/could defer and receive a lump sum.

I guess the bigger question is whether deferral of a UK pension (state or private) will allow you to eliminate WEP for the period of the deferral? the answer from the SSA online calculator certainly seems to indicate WEP will apply because you are entitled to the non-covered pension, even if you don't actually receive it.

I'd be interested to know if anyone knows of any cases where they have successfully (and legally  ) deferred a foreign pension to eliminate WEP from applying.

Interestingly, there's the ongoing debate on the elimination of WEP and GPO, to be replaced with what would be considered a more equitable alternative. The current session of Congress has a proposal - you can read more re:

https://federalnewsnetwork.com/mike-causey-federal-report/2021/04/another-year-another-step-toward-ditching-the-wep/

and the research paper (anoraks required!   ):

https://fas.org/sgp/crs/misc/98-35.pdf

Hey there,

I haven't been on for ages and was surprised you responded to such and post. Cheers. So, it's moot isn't it, because as you said, and I subsequently found put, the WEP is due when you are entitled to the pension. Whether you take it or not is irrelevant.

And I did miss for the deadline for the lump some. My initial message was unclear. By the time my UK pension is collectible, by then I will have had 4 years WEP free US pension. That's one of the reasons I took it early. I briefly thought about going back to work to get some more US quarters but I rolled over and went back to sleep; I'm not that desperate.

Take it easy and thanks the helpful posts I have seen from you.