US Government Pension

Helen,
I will be retiring in 5 years and will be receiving a goverment pension from the State of California.  I am a US citizen, my wife is a US and Irish citizen.  We are contemplating a relocation to the UK, and if I understand the US/UK tax treaty correctly, my pension would only be taxable in the US, because of its 'government' status.  Is this correct?? It seems too simple. Can you shed more light on this??  Thank you. 

In general under Article 17 of the US/UK tax treaty, pensions, social security, and annuaties are subject to taxation in the country in which the individual resides. However, there are a few exceptions to this rule as follows:

(1) Any amount that is paidfrom a pension scheme established in the country in which the individual is not resident that would be tax exempt in that country will be consirdered as tax exempt in the resident country, and

(2) Any lump sum payment from a pension scheme will be taxable only in the country where the pension scheme is established, without regard to the country of residence of the individual.

So the answer to your question, your pension distributon will be exempt from UK taxation provided that contributions paid by you or on your behalf were all done prior to when you establish residency in the UK.

I hope this answers your question.

Helen