Think tank proposes letting young Brits take £12,500 for a house deposit – in exchange for a year of state pension

A new report from the Social Market Foundation (SMF) proposes giving younger people the option to receive the first year of their state pension early as a lump sum of around £12,500, in exchange for starting their state pension a year later.

The policy, which the SMF calls a “Citizens Advance”, is set out in a report by the foundation’s Jamie Gollings and Barney Dowling, published on Tuesday (9 June).

The report describes the idea as “a state alternative to the Bank of Mum and Dad”. The proposal originated with Andrew Lewin, the MP for Welwyn Hatfield, who first put it forward in January 2025.

Under the most straightforward version of the policy, eligible people could take a lump sum equivalent to one year of the full new state pension, which stands at £12,547.60 in 2026/27.

In return, they would forgo the first year of state pension they are entitled to when they reach retirement age.

The SMF stresses that the Citizens Advance is “not a giveaway” but a choice, with recipients trading a payment now for a later pension start date.

Who would be eligible?

The report says a contributory principle is at the heart of the proposal. Only those who had built up 10 years’ worth of National Insurance credits would be eligible.

Because of the 10-year requirement, someone who left school at 18 and went straight into work could claim the Advance at the earliest age of 28, while those who studied for a degree would become eligible later.

The report models several eligibility options, including limiting the policy to people born from 1998 onwards, those born from 1991, and those born from 1986.

The SMF said the sum would be large enough to make a difference at key life stages. With average UK house prices of £268,000, a 5% deposit would be £13,400, which the report says is nearly covered by the Advance.

A couple buying together could combine two Advances for a total of around £25,000, which the report says is almost as much as a 10% deposit on the average home.

The report notes that the availability of mortgages requiring less than a 10% deposit is at its highest since 2008.

Debt clearance the most popular intended use

Despite the housing framing, the SMF’s survey found that paying down debt was the most popular intended use of the money.

Asked how they would use a £12,000, tax-free Advance that could be spent on anything, 18% of respondents chose paying back debt, while 16% chose saving for a housing deposit.

The report found that for renters, housing rose to the most popular use, at 22%. Building a rainy-day fund was the third most common choice, at 13%.

Public support across the political spectrum

The proposal was tested through a survey of 2,000 people aged 25 to 40, carried out by Opinium between 18 December 2025 and 7 January 2026, alongside qualitative research.

The SMF found that 54% of those surveyed were positive about the idea, compared with just 6% who were negative. The report says majority support held across voters of the major UK-wide parties.

It adds that 45% of those surveyed said the policy would make them more likely to vote for the party that introduced it.

A majority of the age group said they would take the Advance, with intended take-up ranging from 50% to 70% depending on the size of the lump sum, the length of state pension forgone, and any restrictions on how it could be spent.

Notably, the report identifies several concerns raised by respondents.

The three most common were that the state pension age could keep rising, that a future government might ask for the money back, and that the government might not tell the full truth about the policy.

The SMF said these findings demonstrate the importance of clarity and transparency if such a policy were introduced.

What it would cost

The report estimates that an untaxed £12,500 Citizens Advance could be delivered for around £1.3 billion in its first year if it were limited to those reaching 10 years of NI credits and born from 1998 onwards.

The SMF projects costs would grow towards £7 billion a year over time as more cohorts became eligible.

Offering the Advance to multiple age groups at once would cost significantly more in the early years, the report says, with an estimated £27 billion in year one to cover 28- to 35-year-olds, or over £45 billion for those up to 40.

The SMF said costs could be trimmed by making the Advance taxable or by restricting it to people earning under the higher income tax threshold of £50,271, each of which it estimates would cut costs by around a third.

According to the report, most of the cost would ultimately be recouped from savings to the state pension system, which it puts at 89% in its central projection.

The SMF adds that the spending would still have to be recorded in the government’s books as spending today, because of the length of time it would take to realise those savings.

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