The Department for Work and Pensions (DWP) is considering a proposal that would allow people born after 1998 to access their state pension early. The Social Market Foundation (SMF) has put forward the idea, which it calls the Citizens Advance, described as a "radical policy proposal that gives younger people the choice to receive the first year of their state pension early as a lump sum."
How the Citizens Advance would work
Under the scheme, eligible individuals could choose to receive one year of the new state pension, which in 2026/27 stands at £12,547.60, as an upfront payment. In return, they would agree to forgo the first year of state pension they would otherwise receive when they reach retirement age.
Eligibility would be restricted to those in a certain age group who have made ten years' worth of national insurance contributions, with certain exemptions. The SMF explained: "In such a scheme the initial outlay required from the state is limited by the eligibility criteria, most importantly the age restrictions."
Costs and financial impact
The SMF estimates that an untaxed £12,500 Citizens Advance would cost approximately £1.3 billion in its first year if it were made available only to those reaching ten years of NI credits and born from 1998 onwards. Initially, only those who went straight into work could claim the Advance in year one of the policy, with others in the 1998 cohort becoming eligible in subsequent years depending on their post-18 educational pathways.
The SMF's forecasting shows that costs would grow towards £7 billion as all groups and younger cohorts become eligible and take the Advance over the following years. After this, costs would increase in line with the state pension.
Balancing the outlay
The SMF noted that the initial outlay is "balanced, though not necessarily exactly, by the promise of a substantial saving in the future from the state pension bill." The thinktank also sought to reassure the public: "The public can be reassured that only those who work hard and pay their taxes, or who are unable to do so, will receive money as part of the policy."
