Withdrawing from UK pension pots

I am a dual US/UK citizen currently living in the UK (retired).

I would like to take the 25% tax free lump sum from my UK pension pot and draw down on a monthly basis for 7 years to deplete the pot. At which time because of my age I will  need to start withdrawals from my US IRA's.

Can someone explain how this is treated for tax purposes in the US (just the UK pot for now)?  It was my understanding that pensions were only taxed in the country of residence, but then I heard about the "savings" clause and am totally confused again!!!!

thanks.

This question has fuelled a great deal of debate recently, sadly, with no bullet proof final answer.

To which definition of 'lump sum' do you ascribe; HMRC's or the IRSs'? In your opinion, which definition of lump sum does the treaty assign? Where will you find the definitive IRS statement that pertains to any tax free foreign pension amount? To be certain, are you saying you did not take a UFPLS option?

Your verifiable interpretation of the above will determine whether you declare the 25% tax free lump sum amount to be taxable in the US or not. On purpose, I did not take the 25% tax free amount on my UK pension, so avoided the question. My UK company pension contains a yearly COLA enhancement and, unlike yours, is for life.

Is your pension a government pension (I would guess not)? If not, the normal withdrawals from your pension pot (minus any basis) will be taxable in both the US and UK, with tax credits allowed by the US for tax paid to the UK.

For your reading enjoyment:
https://britishexpats.com/forum/usa-57/uk-pensions-related-uk-us-tax-treaty-894492/

https://www.taxprotalk.com/forums/viewtopic.php?f=8&t=3780&p=98291&hilit=UK+25%25+tax+free+lump+sum#p98291

Thanks for your reply.
I haven't taken anything yet and am trying to understand the rules!!! The two articles you referred me to are exactly why I am confused!!! I am currently a UK resident so one doesn't really apply. My pension pot is just a pile of investments not a pension as such (much like a US 401K).

Instead of taking your lump sum, why not take a series of large payments for the first two years? That way you can claim they are periodic payments and claim the first 25% is tax free. Do you have a basis in the pension? If so you will only pay tax on the profit and allocate the profit portion of your withdrawal to the 25% tax free. I have a US accountant I can refer you to who will do all this for you for a very reasonable fee - PM me if you want a referral.

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