If you retire early – whether by choice or because you are forced to do so by your employer – your monthly pension could be considerably lower, creating financial hardship in later life. Retiring just 5 years earlier – at age 60 rather than 65 – after having contributed to a pension fund since the age of 20 could result in your pension being 27 percent lower. Retiring 10 years early could reduce your monthly pension by 47 percent.
Pensions are significantly lower because, not only will you have saved less, your retirement capital will also have to sustain you for longer. On average people are living longer; 83 for men and 87 for women. If you retire early and live longer than average you could spend more of life in retirement (when you are dependent on your pension) than you spent working (when you build up your retirement savings).
[Source: The Independent on Saturday Personal Finance supplement, 2 April, 2016]