Pension transfer values have reached record levels in recent weeks, which is tempting members out of so-called Defined Benefit schemes.
But it’s thought many don’t fully realise the risks and that they could end up poorer in retirement as a result.
In many cases the transfer value isn’t high enough to compensate for the guarantees that are given up.
There is a large risk that cash could be put in investments that disappoint in the future, according to pension provider Hargreaves Lansdown.
It comes as Sottish Widows said it has seen an 170 per cent increase in requests for transfer value analyses, compared to last year.
Selectapension data also shows adviser transfer analysis activity is around 50 per cent to 100 per cent higher than a year ago.
Final salary pension members should take four important steps before transferring out of a final salary scheme, according to Tom McPhail, head of policy at Hargreaves Lansdown.
An investor could leave the scheme if it is preventing flexibility around death benefits or flexible income withdrawals for tax planning.
However, the saver must understand the investment risks of moving into another type of pension that doesn’t guarantee income.
An investor shouldn’t make a transfer if they will rely on the income from the savings for essential spending in retirement.
The future growth rate of savings should also be forecast to match the final salary pension.
Mr McPhail said: “We are concerned by the risks to investors who may give up a guaranteed pension from a final salary scheme in exchange for cash now, only to regret it later.
“In this post pension freedom world, and with pension transfer values at record levels, it is very easy to be persuaded by the lure of short-term cash.
“There is mounting anecdotal evidence that not all this activity is robust: for example we are seeing and hearing evidence of targeted sales operations seeking out defined benefit scheme members to persuade them to transfer.
“We welcome recent government and FCA actions to protect investors, such as moving to ban cold-calling, however it will probably never be possible to completely eliminate the risks to investors.”