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Proposal to give young people £12,500 now as opposed to first year of retirement

ended 18. June 2026

A leading think tank has put forward a policy proposal to allow young people to get the first year of their state pension early as a lump sum. 

The Social Market Foundation (SMF) published a proposal for Citizens Advance, by which those born from 1998 onwards could take a tax-free lump sum of around £12,500 in exchange for delaying receipt of their state pension by a year in retirement.

It would only be available to those who have built up at least 10 years’ worth of National Insurance credits, meaning anyone who would benefit would already be on the path to claiming the state pension later in life. 

A survey by the SMF found the most popular intended use of the Citizens Advance was debt repayment (18%), closely followed by housing (16%). It's seen as a way to help address the inequality of some people being able to rely on the "Bank of Mum and Dad", by allowing younger people from less privileged backgrounds to access capital they're contributing to earlier.

  • What are your thoughts on the proposal?
  • What are its pros?
  • What are its cons?

Responses this morning.

9 responses from the Newspage community

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Anita Wright
Chartered Financial Planner at Ribble Wealth Management
Let’s call this what it is. A clever way to make a future liability sound like a gift. You hand a 27 year old £12,500 today and tell them they’ve simply borrowed it from their own retirement. Charming. Except the state pension is not a savings pot with their name on it. It is a promise funded by tomorrow’s taxpayers, and tomorrow’s taxpayers are already on the hook for a great deal they cannot afford. The cruel detail is in the survey itself. The most popular intended use is debt repayment. So we would advance money to people already underwater, with nothing to stop the same hole being dug again next year. Pay off the card, then reach for the card. There is no guarantee the cash repays old debts rather than funding new ones. Worse is the lesson it teaches. Do not save, do not plan, the state will front you the money and sort it out later. That habit is expensive, and very hard to unlearn.
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Scott Gallacher
Director at Rowley Turton
Given how frequently governments tinker with State Pension rules, many young people will feel that a bird in the hand is worth two in the bush.

If offered £12,500 today in exchange for giving up a year's State Pension decades from now, it's hard to see why many wouldn't take the deal. Not everyone will live long enough to receive a State Pension, and future governments may yet move the goalposts again.

The problem is that while it may be a rational choice for the individual, it's a questionable policy for the country. Borrowing more money today in return for potential savings 40 or 50 years down the line does little to address Britain's immediate fiscal challenges.
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Nouran Moustafa
Practice Principal & IFA at Roxton Wealth
I understand the intention, but I think this proposal risks solving one crisis by creating another. Young people do need more support with debt, housing and early-life financial pressure, but bringing forward state pension money is not a clean fix.We already have a retirement adequacy problem. Many people are not saving enough, pension access rules are tightening, and the state pension age is already a major political pressure point. Taking £12,500 now in exchange for delaying retirement income later may sound attractive at 25, but it could become painful at 68 or 70.The real question is why working young people need to raid their future retirement to survive today. That is the broken part. We should focus on higher take-home pay, better income thresholds, stronger work incentives, housing affordability and getting more people into productive employment.The pro is obvious: capital when young people need it. The con is bigger: normalising borrowing from an already fragile retirement.
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Harry Goodliffe
Director at HTG Mortgages
This proposal recognises an uncomfortable truth: money is often most valuable when you're young, not when you're retired. £12,500 could be life-changing for someone trying to clear debt or save for a deposit, but it may have far less impact decades later in retirement. I actually like the idea because many younger people already feel the state pension goalposts keep moving. If that money helps someone buy a home and improve their finances today, it could end up being worth far more than an extra year of state pension many decades down the line.
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Philly Ponniah
Chartered Wealth Manager and Financial Coach at Philly Financial
Retirement funding is already precarious, and allowing younger generations to dip into future pension income risks sending the message that retirement savings are there to solve today's financial problems.

What stood out to me was that debt repayment was the most popular intended use. That suggests the underlying issue isn't simply access to capital, but wider challenges around financial resilience, education and money management. If we don't address the behaviours and circumstances that lead to debt in the first place, a £12,500 lump sum may provide temporary relief without creating lasting financial security.

I understand the appeal, particularly for those without family support, but I'd rather see greater focus on improving financial literacy and helping people build strong financial foundations than asking them to sacrifice part of an already uncertain retirement.
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Hannah Vandervennin
Director - Mortgage Adviser at The Mortgage Consultancy
Born in 1998, your state pension age is already 68 and under review, which means this asks young people to borrow from a retirement four decades off to fix a cash squeeze that's biting now. And the ten-year National Insurance bar quietly favours the steadier earners. The young person with no Bank of Mum and Dad is also the one most likely to have a patchy contributions record and not qualify at all. It's robbing your future self to help your present one, and the fairness it reaches for may miss the people it was built for.
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Rob Mansfield
Independent Financial Advisor at Rootes Wealth Management
This is a mad idea. The warning sign in this proposal is the level of fear around whether the state pension age will keep creeping up or even exist at all later on. This is a common belief I come across and could lead people to conclude they've got nothing to lose by taking it. That may seem fine now but it could lead to misery for a manual worker who's got to work one more year before they can claim their state pension.
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Charles Hart
Business Principal at LionHart Mortgages & Protection
This is exactly the kind of creative and real world thinking that we need.

With our population increasingly working later in life and still struggling to get on the property ladder this is a great initiative but it should also have guardrails. Taking this money to buy a property could/should be a sound investment, but without rules around how it can be used what could it be wasted on, and could it even cause harm to the wrong people without enough support or eduction on handling lump sums of money.

Lenders are increasingly doing more to support low or 0% deposit borrowing but costs such as solicitors, stamp duty, mortgage fee’s, furniture and decoration still apply, and I think this could be a great solution to that.
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Helen Llewellyn
Founder at Elemental Tribe
Throwing money at a crisis can look like taking a penalty with no goalkeeper, but it still misses the point if people are aiming at the wrong goal.

Without better financial education, this is an impossible choice. Investing early for retirement is one of the most powerful things a 27-year-old can do.

If a decent life is unaffordable without drawing on future pension income, deeper action is needed. Otherwise we are turning tomorrow’s security into today’s sticking plaster.