I may be wrong in the following, but if you think I am, please quote chapter and verse from the relevant authorities if you have another interpretation since I want to understand why and how any tax due is calculated, credited or rendered non-taxable in some way. I am considering the position of a UK resident as defined by the Treaty, who may or may not be a US citizen. US SS and UK State Pension are not included in this discussion - they are clearly taxable only in the State of residence.
As I understand it, an IRA is specifically included under the definition of pension scheme for the purposes of the DTA, so it is taxed to UK residents, as defined by the treaty, under Article 17(1) of the UK-US treaty. An IRA is US sourced. Other pensions may be UK or US sourced. In the table in PUB 901 US Tax Treaties, the witholding rate for pensions is 0%, and the column headed Pensions does not specify the source of the pensions, unlike interest and dividends, so I conclude that both US and UK based pensions are taxed the same way. Should it actually specify US pensions ? Article 17(1) says pensions are taxed by the UK when received by a UK resident. If that UK resident is a US citizen as well, then since Article 17(1) is not exempt from the savings clause, they can be taxed by the IRS as well. The IRS still expect it to appear on the 1040 of a US citizen and will tax it accordingly, but the US will allow a credit against US tax for tax paid to the UK. I believe this is done using Form 1116 (I have yet to figure out if it goes under the general category income or resourced by treaty income - maybe somebody can tell me). Is the rather obtuse re-sourcing procedure of Article 24 (as applied to dividends in the example in the Technical Explanation to the Treaty) applied to pensions, but using the 0% witholding rate ?
I have read on several accountancy firm websites that the US can, and will tax a regular UK source employment pension received by a US citizen, which confirms my analysis. I have also read a number of blogs that say a UK pension is only taxable in the UK (which is not the same as saying that a tax credit reduces US tax to zero), so I would like to resolve the conflict with some hard evidence.