The Social Security Fairness Act was signed into law on 5 January 2025.
This hard-fought legislation is designed to correct a longstanding imbalance of how US Social Security benefits are calculated.
Read on to find out what the Social Security Fairness Act will change and how it may affect UK expats living in America, and US expats in the UK.
Out with the old…
The introduction of the Social Security Fairness Act effectively replaces the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO).
Though these were both supposed to reduce inequality, they actually did the opposite.
For those in receipt of a government pension following jobs where no social security was paid, or were receiving income from a non-covered pension scheme, the WEP effectively reduced the amount they were paid.
Meanwhile, the GPO reduced the amount of Social Security payments for spouses and surviving spouses of those affected by the WEP rules. In effect, the GPO was designed to prevent individuals from receiving disproportionately high spousal or survivor benefits in addition to their own government pensions.
Government Executive reports that: “The WEP affects more than 2 million retired public servants, while 750,000 spouses and survivors are affected by the GPO, with many beneficiaries seeing the entire benefit eclipsed by the offset.”
The Congressional Budget Office estimates that, for affected individuals:
- Waiving WEP will raise average Social Security benefits by $360 a month by December 2025.
- Restoring GPO will increase monthly payments by an average of $700 for spouses and $1,190 for surviving spouses.
Benefits will rise in line with cost of living increases (COLAs) each year. Plus, payments will be backdated to January 2024.
This is all very good news for the millions affected but change takes time.
The Social Security Administration has warned that it could take at least a year to adjust the benefits for everyone who is due an increase, and pay any lump sum payments to cover what they would have received in 2024.
In with the new…
As he signed the Social Security Fairness Act into law during his final month in office, President Biden said: “The bill I’m signing today is about a simple proposition: Americans who have worked hard all their lives to earn an honest living should be able to retire with economic security and dignity.”
Repealing WEP and GPO will change the lives of millions of Americans, as well as some non-resident expats.
You may be affected by the Social Security Fairness Act if you’re a UK expat living in the US or a US expat in the UK:
- Brits living and working in the US: If you are a British expat and have worked in the US long enough to qualify for Social Security benefits, but also receive a UK State Pension, you will now receive your full entitlement of US benefits, without reduction.
- US expats living in the UK: If you’re a US citizen and have worked in the UK and contributed to the UK State Pension system, you’ll benefit when claiming Social Security in the US.
If you’re among these, you may benefit from greater financial stability in retirement.
Taking a wider view, the change is an encouraging sign. It goes a long way in recognising the global nature of the modern workforce, as well as the importance of ensuring fair treatment across borders.
Rather than only affecting US citizens, the change will have a positive financial effect for thousands of retirees who have contributed to multiple systems during their careers.
Key benefits if you’re affected by the Social Security Fairness Act
If you’re affected by the changes introduced by the Social Security Fairness Act, you may benefit from:
- Increased retirement income – Whether you’re already retired or still working, the removal of the prior reductions means you will be able to take full benefit from both your UK State Pension and US Social Security payments. As such, this could mean you see a substantial change to your retirement income.
- Less inclination to curtail your cross-border career – The removal of this potentially significant financial penalty could make you keener to pursue your cross-border career for longer.
- Simpler financial planning – Now that the uncertainty around WEP has been removed, you’re likely to be in a stronger position, and able to plan your retirement with more confidence and clarity.
If your retirement income will be affected by the introduction of the Social Security Fairness Act, now is the time to assess how much you may now expect to receive from all applicable sources of State benefit payments.
The adjustment in how much you may receive could mean it’s wise to rethink and restructure your retirement savings and reconsider your long-term financial plan.
Get in touch
If you are a Brit living in the US or a US expat in the UK, now is the time to review your retirement plans and understand how these changes will impact you.
With advisers on both sides of the Atlantic, we are here to help you plan your financial future. To understand more about how the Social Security Fairness Act may affect you and how we can help you prepare for retirement, please get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
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