FBAR on foreign pensions

[QueenOfBlades 224]

I just spent half an hour investigating. It looks like as long as you're entitled to make Class 2 NI voluntary contributions, then you really should, as they are currently 2-70 UKP per week. You can make class 2 contributions if you paid NI for at least 3 years in the UK, and were either employed, self-employed or claiming unemployment benefit immediately before leaving.

The rules are changing, for instance possibly rising to require 35 years of NI contributions, up from 30 years, but it will probably still be worthwhile.

You are entitled to claim both UK and US state pensions, providing you qualify for both.

As for the tax reporting requirements for the FATCA and FBAR, you won't have to do that until you actually get paid the state pension. By then the rules will probably have completely changed anyway.

Thank you. I'm thinking it probably is worth it. So for a state pension, you only report it once you're claiming it? Do you know anything about whether my USC fiance will be able to get anything from it if I passed away? I want all of our pension investments to be things we can both use/claim on.

[Nich-Nick 3,354]

Holy #######! We file the FBAR each year but do not file the FACTA (honestly this is the first heard about it) it does not come up in the turbo tax stuff (the FBAR does)... I guess I have to look into this one now as we have an account with more than 100k ! Darn it all!!!

It comes up on Turbotax. The form was also part of TurboTax in 2011 and 2012. It had some glitches that didn't allow an additional page to be added for multiple accounts and rejected some e-filings. They worked out the programming kinks by 2012.

[Owen_London 65]

Thank you. I'm thinking it probably is worth it. So for a state pension, you only report it once you're claiming it? Do you know anything about whether my USC fiance will be able to get anything from it if I passed away? I want all of our pension investments to be things we can both use/claim on.

That's my understanding, but it's based on second-hand info from reading a post by someone who seems knowledgeable on a forum elsewhere. Possibly Nich-Nick knows more?

To your second question, I don't know, sorry.

[Nich-Nick 3,354]

All this makes my head wooly, so every time I start to research it I give up. Owen-- by US state pension, do you mean Social Security?

There is a Windfall Elimination Provision by Social Security where your retirement benefits can be reduced if you are drawing a foreign state pension (or one that is like US Security Security)...provided by the government, not an employer. I think. Maybe. http://www.ssa.gov/international/wep_intro.html

Have a go at that and see if you can figure it out. I'd rather have a root canal than wade through all the rhetoric. I've been helping all these people with visas for years. Now I want somebody to write me a step-by-step guide to foreign pensions, Social Security, and the IRS, with no abbreviations, on an 8th grade reading level...hahaha.

And hurry up because we are 'bout there....either drawing pension or deceased.

[Owen_London 65]

All this makes my head wooly, so every time I start to research it I give up. Owen-- by US state pension, do you mean Social Security?

There is a Windfall Elimination Provision by Social Security where your retirement benefits can be reduced if you are drawing a foreign state pension (or one that is like US Security Security)...provided by the government, not an employer. I think. Maybe. http://www.ssa.gov/international/wep_intro.html

Have a go at that and see if you can figure it out. I'd rather have a root canal than wade through all the rhetoric. I've been helping all these people with visas for years. Now I want somebody to write me a step-by-step guide to foreign pensions, Social Security, and the IRS, with no abbreviations, on an 8th grade reading level...hahaha.

And hurry up because we are 'bout there....either drawing pension or deceased.

- Yes, I think so. I couldn't remember the right name for it while I was writing.

- It looks like foreign government and employer contributions are both liable to WEP, according to the start of this pdf.

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

- I expect to retire in about 25 years, but if I ever decide to do this, I'll let you know.

[QueenOfBlades 224]

- Yes, I think so. I couldn't remember the right name for it while I was writing.

- It looks like foreign government and employer contributions are both liable to WEP, according to the start of this pdf.

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

- I expect to retire in about 25 years, but if I ever decide to do this, I'll let you know.

Hmm, looking at that document, it says there are exceptions if you have 30 years of substantial social security income. I would assume that means if I've paid into social security for 30 years then I'd be exempt from it. Hmm.

[Owen_London 65]

Hmm, looking at that document, it says there are exceptions if you have 30 years of substantial social security income. I would assume that means if I've paid into social security for 30 years then I'd be exempt from it. Hmm.

Yes, you should be exempt from WEP on that basis, which means making voluntary contributions makes even more sense for you.

Bear in mind that no-one has any idea what the UK state pension or US social security will be like by the time you retire, though.

Edited July 2, 2013 by Owen_London

[QueenOfBlades 224]

Yes, you should be exempt from WEP on that basis, which means making voluntary contributions makes even more sense for you.

Bear in mind that no-one has any idea what the UK state pension or US social security will be like by the time you retire, though.

True. The whole thing is a headache. All I know is, if Nich Nick doesn't know, I don't have a hope in Hell.

[rjm_cmyk 75]

I could be wrong on this but I seem to recall that as a result of current fiscal tightening the current government as planning on ensuring that only UK nationals who have paid the appropriate NI receive UK state pensions i.e furriner spouses will not have any entitlements either during the life of the UKC or indeed after they die.

If this is important to you then you need to check with DWP and/or assume such rules may well change over time.

With the best will in the world this is not the best place for long term financial advice.

[QueenOfBlades 224]

Yeah, I'm just curious to see what other UK-ies are doing with it and if anyone's done anymore looking into it. I am getting a little ahead of myself thinking about all my retirement options at 23 but I suppose I do need to know as I'll need to start doing things now to get all my years in.

[Nich-Nick 3,354]

Maybe Owen and I can team up. I understand the US side better for Social Security and income tax. I don't have a clue about UK pensions, taxes, or what class 2 NI contributions, or DWP means.

Here's a brief plain talk about Social Security. As with all government programs there are all the exceptions, so this is basic.

You collect a monthly amount based on your contributions when you reach retirement age. 65 for a long time but older for you young ones because they raised the age. People who earned higher salaries and worked longer get more than people who worked occasionally and for low wages.

You may start collecting early at age 62, but you get less per month if you choose that. In my opinion, take it as soon as you can. The money you leave on the table by not collecting is not made up by the higher monthly amount for a very long time...like 15 years to break even. You may not live that long. I had a friend that turned 62 and even the Social Security worker told her she was foolish not to start collecting. Good decision because she died two weeks ago.

Queen, if your husband dies, you can collect his Social Security or you own, whichever is higher. A widow can collect hubby's starting at age 60. If you remarry, you lose his Social Security option. If you divorce your new husband, you can go back and collected on the deceased husband's again. If you remarry at age 60 or older, you get to keep collecting deceased husband's SS. All that gets convoluted with ex-husbands. I think two ex wives can each collect based on the same man.

Wives can collect a bit based on their husband's contributions even if he isn't dead. If your own SS benefit would be higher, then better to collect your own. The portion of his is good for non-working spouses and stay-at-home Moms. If he dies, you get his bigger amount and can apply for that if it's more than your own. (This also applies to men collecting on wives who were the bigger wage earner.)

Social Security wages are partly taxable. If you continue working and earning a lot of money, then more of your SS check gets taxed. That is a reason to hold off applying for Social Security early because you're kinda wasting it to taxes if you are still earning a big salary in a full-time job. I can't quote you numbers off the top of my head and I'm not going to look it up. Just throwing out a general concept here. Turbo-tax will crunch the numbers for you and know how much of your social security check is taxable so nothing you have to memorize or count on you fingers and toes.

What I want to know about the UK is is there typically a beneficiary spouse that can collect on a deceased husband's private pension or does it just end? What about the state pension (is that NI)? Every time I ask my English husband anything about that, he doesn't know. Do you know Owen? Does anybody in the UK need to know my name and I am the wife?

Edited July 2, 2013 by Nich-Nick

[QueenOfBlades 224]

Maybe Owen and I can team up. I understand the US side better for Social Security and income tax. I don't have a clue about UK pensions, taxes, or what class 2 NI contributions, or DWP means.

Here's a brief plain talk about Social Security. As with all government programs there are all the exceptions, so this is basic.

You collect a monthly amount based on your contributions when you reach retirement age. 65 for a long time but older for you young ones because they raised the age. People who earned higher salaries and worked longer get more than people who worked occasionally and for low wages.

You may start collecting early at age 62, but you get less per month if you choose that. In my opinion, take it as soon as you can. The money you leave on the table by not collecting is not made up by the higher monthly amount for a very long time...like 15 years to break even. You may not live that long. I had a friend that turned 62 and even the Social Security worker told her she was foolish not to start collecting. Good decision because she died two weeks ago.

Queen, if your husband dies, you can collect his Social Security or you own, whichever is higher. A widow can collect hubby's starting at age 60. If you remarry, you lose his Social Security option. If you divorce your new husband, you can go back and collected on the deceased husband's again. If you remarry at age 60 or older, you get to keep collecting deceased husband's SS. All that gets convoluted with ex-husbands. I think two ex wives can each collect based on the same man.

Wives can collect a bit based on their husband's contributions even if he isn't dead. If your own SS benefit would be higher, then better to collect your own. The portion of his is good for non-working spouses and stay-at-home Moms. If he dies, you get his bigger amount and can apply for that if it's more than your own. (This also applies to men collecting on wives who were the bigger wage earner.)

Social Security wages are partly taxable. If you continue working and earning a lot of money, then more of your SS check gets taxed. That is a reason to hold off applying for Social Security early because you're kinda wasting it to taxes if you are still earning a big salary in a full-time job. I can't quote you numbers off the top of my head and I'm not going to look it up. Just throwing out a general concept here. Turbo-tax will crunch the numbers for you and know how much of your social security check is taxable so nothing you have to memorize or count on you fingers and toes.

What I want to know about the UK is is there typically a beneficiary spouse that can collect on a deceased husband's private pension or does it just end? What about the state pension (is that NI)? Every time I ask my English husband anything about that, he doesn't know. Do you know Owen? Does anybody in the UK need to know my name and I am the wife?

Really helpful post Nick, thank you. I wouldn't mind knowing your name, if you don't mind, unless you're happy being called Nick?

I know with pretty much every private pension I've come across here, you list your next of kin who you'd want it to go to and they get a lump sum/payments (reduced though, I think). I know they definitely get something from it. Class 2 NI contributions is basically just a band of National Insurance that UK citizens living abroad pay if they're employed to still entitle them to certain UK benefits including a state pension, provided that they meet a certain small criteria. It's £2.70 something a week as Owen said above. Not too bad really. DWP is the Department for Work and Pensions, the guys you'd need to contact regarding claiming a state pension/anything to do with that. I need to look into it a little more, but with my pension, I had to list all of my dependents from it and there are clauses about what would your spouse get if I were to die etc. Typically the spouse always gets something. I should double check that applies to USC's as well, but there was nothing in my paperwork saying otherwise.

State pensions.. no idea, I hope someone could clarify for me as I want to know my fiance will be looked after in retirement if the worst should happen, and for us both to enjoy a long happy retirement before then.

Just to clarify about state pension - NI is national insurance, and to qualify for a full state pension, you need to have worked a certain amount of years and paid NI on it. A lot of useful info on the link below. If there is a gap in your National Insurance, you can choose to contribute voluntarily from abroad or they can tell you how much you'll need to pay to plug in the gap if it's a small amount. You can check your husband's NI contributions and see how many credits he has by contacting DWP. Even if he hasn't got the full stuff he needs, he should still be entitled to something if he worked for over 5 years I think it is.

http://www.hmrc.gov.uk/international/ni-abroad.htm

Edited July 3, 2013 by QueenOfBlades

[Owen_London 65]

What I want to know about the UK is is there typically a beneficiary spouse that can collect on a deceased husband's private pension or does it just end? What about the state pension (is that NI)? Every time I ask my English husband anything about that, he doesn't know. Do you know Owen? Does anybody in the UK need to know my name and I am the wife?

Let's be honest here, I'm just good with google. QoB's link is one of several I skimmed through earlier, for example.

Using these skills, I found this: http://www.pensionsadvisoryservice.org.uk/state-pensions/death-benefits

But this article suggests that, firstly, benefits to foreign spouses will be removed, and secondly, the UK state pension is changing: http://www.bbc.co.uk/news/uk-22423878

And they don't like giving out useful details: https://www.gov.uk/bereavement-payment/eligibility

"If you’re abroad: Contact the International Pension Centre to find out if you can claim [bereavement payment] if you’ve moved abroad."

So, I think your best bet may be to contact the UK International Pension Centre and ask them. Details here: https://www.gov.uk/state-pension-if-you-retire-abroad/how-to-claim

There you go...

[rjm_cmyk 75]

Anyone planning on leaving should (IMHO) get a state pension statement and find out if it will be worthwhile to continue to pay reduced rate NI to "secure" their state pension.

Start here - https://www.gov.uk/state-pension-statement

[Shari 6]

Hello. I saw this post the other day as I was searching for answers on UK pensions and whether monthly SS benefits were reduced due to getting monthly money from a UK pension. I wrote to SS and got this answer back:

Thank you for contacting the Social Security Administration.

For purposes of determining whether Social Security benefits are payable, a person’s earnings for a taxable year are the sum of pay for services as an employee plus all net earnings from self-employment (minus any net loss from self-employment) for that year.

Wages for Social Security purposes are gross wages - wages before any payroll deductions for income tax, Social Security tax, dues, insurance, or other deductions by the employer. We use gross wages as the basis for Social Security credit and for determining whether benefits must be withheld because of earnings.

If you’re self-employed, Social Security only considers your net earnings reported on Schedule C and Schedule SE of your tax return.

Nonwork sources of income that do not count as wages for the earnings test include, but are not limited to, the following:

- inheritance payments,

- pensions,

- income from investments,

- IRA distributions,

- interest

- 401k distributions

The Social Security retirement program insures against loss of earnings from work and not against the failure to have investment income.

More information may be found in our publication called “How Work Affects Your Benefits,” publication number 05-10069, available at the following Internet address: http://www.socialsecurity.gov/pubs/10069.html

My husband has a UK state pension and a UK shipbuilding pension. Do you take the above to mean that he will get his whole monthly SS amount because his monthly pension payments do not count as wages? It is so confusing. I wish someone on here was old enough and gone through this to let us know. We are older but have another 10 years to retirement so are trying to figure it out all now. Thanks everyone!

Edited September 11, 2013 by Shari