I've read Article 17 of the 2001 treaty.
the treaty is set up so that the same income stream is not taxed by both countries. Look at the very first page of the 2001 treaty document.
it is very clear in Article 17 paragraph 1a, that the pension is taxable only in the country based on where you reside;l both countries will not tax you:
1. a) Pensions and other similar remuneration beneficially owned by a resident of a Contracting State shall be taxable only in that State
paragraph 1b is just saying that even though both countries have agreed that the pension payment is taxable, if one country decides it's NOT taxable if you are residing there, then it's not taxable THERE but doesn't cause it to be tax-free in the other country. So let's say the UK decides it's not taxable in the UK if you were living there, that doesn't mean it's not taxable in the US if you are living there!
As a US citizen, the US taxes your worldwide income that would include pensions received from working in other countries so it makes sense the US would ensure the treaty was worded this way.
i've tried to parse out paragraph 1b so it makes sense
b) Notwithstanding sub-paragraph a) of this paragraph, the amount of any such pension or remuneration paid from a pension scheme established in the other Contracting State (this means the UK since that is where the pension was established) that would be exempt from taxation in that other State (since the word 'that' is used, it's still referring to the 'other Contracting State', the UK) if the beneficial owner were a resident (so this applies if you were still living in the UK) thereof shall be exempt from taxation in the first
meantioned State (that first mentioned state is the UK because that is what was mentioned first in this paragraph)
why do you think that the UK pension is not taxable in the US? it very well could be that the UK pension is not withholding UK taxes because it knows you are residing in the US and by treaty, it's not taxable to the UK but only taxable in the US. As noted the US taxes its citizens on their world wide income so even if the UK wouldn't tax it (for whatever reason) doesn't mean the US wouldn't tax it.
