In our specific situation, the 2011 tax return is complicated for other reasons. DH has US income (not much however) for the period he was still in the US (Jan 1 - June 17). His only income subsequent to returning to the UK is of course the UK State Pension and the US SS benefit (again, very small). My income in 2011 was all earned income from self-employment, and all earned prior to my arrival in July.
Obviously the treatment of DH's UK pension is an issue for the 2011 tax year, but we (I) will read, reread, and file a return, err on the side of caution for the US liability with the intent of filing an amended return later if we overpaid.
For 2012, DH will have only the UK and US benefits, and the total amount will be under the UK personal allowance amount. expect to have about $4K in earned income from an upcoming consulting assignment in the US; I have also decided to start receiving US SS in 2012, and will apply in May. My US benefit is significantly higher, and will be greater than the UK personal allowance for the 2012-2013 tax year. We have some minor interest income, but not enough to worry about in the grand scheme of things.
that with pension and miniscule interest income only, beginning with the 2012-13 UK tax year, DH would pay no UK income tax, and I will pay a modest amount. If we continue to file a joint US return, given our ages, there may be little US tax due from 2012 onward until I start taking distributions from my retirement funds (IRA and SEP IRA). (That issue can be shelved for the time being unless we need the money.) FBAR filings are another bit of paper, but we've been doing those since the 90's, so no big deal.
Personally, I would rely on the Explanatory Memorandum language rather than get too bogged down with confusing verbiage in the treaty itself. Folk who write the stuff that goes into the Federal Register or other documents aren't necessarily the most proficient in making the written word clear to all readers - and that opinion is based on years of experience working with various Fed agencies.
BUT - whether the UK pension is indeed taxable by both countries remains a question that needs a definitive answer. Hopefully that will come from a genuine tax professional rather than one of the types who seem to be trolling for business this time of year