Lifetime allowance

It's the value of the pot when you "crystallise" it. When that happens depends on how you take it. If you buy an annuity, it's the point at which you purchase the annuity; if you enter simple drawdown, it's the point at which you designate the funds as being available to drawdown; if you enter phased drawdown, you crystallise each different section of the pot separately over the course of your retirement. I think we need more information about what you're doing with your pension, and what you mean by "retirement".

It's still a bit unclear to me what you mean by "when I retire next year". This might sound facetious so I'll explain what I mean:

Usually, when people say they are retiring, they tend to mean they're leaving work. From a pensions perspective, that's irrelevant; what's relevant is what they do with their pensions, and when. So for instance, you've already "retired" from the SIPP containing Pension 1; you crystallised this at whatever point you put it into drawdown and took the lump sum. So that was tested against the LTA at that point, and it won't be tested again except in one very particular situation that I'll explain in a minute.

Assuming that when you retire next year, you also put Pension 2 into drawdown (like you did with Pension 1), you will be crystallising it at this date. This means it'll get tested against the LTA at that date, and again it won't be tested against the LTA after that point.

So future investment returns on the remaining invested funds within Pension 1 and Pension 2 won't be tested against the LTA after you've started taking payments from then, with the following exception:

If you reach age 75 and you haven't withdrawn all of your drawdown funds, and the remaining pot is worth more than the fund that you had originally designated for drawdown (i.e. the amount that you originally crystallised for that purpose), the difference between the pot at age 75 and the pot size when you started drawing down (not including the initial 25% tax-free lump sum) is tested against the LTA.

So let's say you've already crystallised Pension 1 which was worth, for argument's sake, £300k (£75k lump sum paid upfront, £225k left in drawdown). Then let's say that next year you're going to crystallise Pension 2, which is worth £600k (£150k lump sum paid upfront, £450k left in drawdown). The total crystallised for the purposes of drawdown is £675k, and the total crystallised altogether is £900k, so you've used up 90% of the LTA.

Then let's say you get to age 75, and you've taken so little from your drawdown fund and the investments have done so well that you now have £800k left in your drawdown fund at that point. Then the difference between £800k and £675k - i.e. £125k - gets tested against the LTA. Assuming that the LTA isn't any higher by that point (though it should be, if it even still exists), it will use up 12.5% of the LTA. You've therefore used up 102.5% of the LTA, and you'll be charged on the excess.

If, however, you've withdrawn enough from your drawdown fund that only £500k remains at age 75, this is lower than the £675k you originally crystallised for drawdown, so you don't use up any more of the LTA at this point.

The way to avoid a charge, then, is to ensure that you withdraw at a rate that doesn't leave your fund becoming overgrown by age 75.

Am I not right in thinking that there would be another test at death (whether before or after 75) where the same calculation and potential liability to the penal 55% lump-sum tax (on your estate) will exist?

Am I not right in thinking that there would be another test at death (whether before or after 75) where the same calculation and potential liability to the penal 55% lump-sum tax (on your estate) will exist?

No, I don't believe so. If you have uncrystallised funds and die before age 75, then yes, but the OP's funds will be crystallised when they are put into drawdown. In any case, no test against the lifetime allowance is carried out beyond age 75, even upon death, other than a BCE 3 (non-standard increase in payment). If you die before 75 leaving a crystallised drawdown pot, you pass it on tax-free no matter the amount; if you die after 75, you pass it on and it can be drawn down (or paid out in a lump sum) at the marginal tax rate of the beneficiary. I'd link to HMRC's pensions tax manual but it doesn't make this very clear; Royal London does a better job here http://adviser.royallondon.com/pensions/technical-central/information-guidance/death-benefits/death-benefits-from-april-2015/.