The “Citizens Advance” is a plan to give young people the choice of receiving the first year of their state pension early as a lump sum. A report advocating the plan has been published by the Social Market Foundation (SMF) – a think tank seeking to promote free-market ideas that advance social justice.
The idea originated from Andrew Lewin, the Labour MP for Welwyn Hatfield elected in 2024, and has been developed by the SMF, which describes it as “a state alternative to the Bank of Mum and Dad”.
The idea is to give young people who do not have rich parents access to a capital sum that could contribute to the deposit on a house or to pay for further education or training. Currently, a year’s state pension is worth £12,500.
The SMF has surveyed the opinions of 25- to 40-year-olds, who were in favour of the idea, irrespective of whether they would take advantage of the scheme, with 54 per cent positive against just 6 per cent negative.
A majority of the age cohort say they would opt to receive the Citizens Advance, ranging from 50 per cent to 70 per cent, depending on the value of the lump sum, length of state pension forsaken and restrictions on how it can be spent.
The most popular intended use of the money was “debt repayment”, chosen by 18 per cent of respondents.
Respondents called the plan “empowering” and allowing them to take matters into their own hands.
The most frequent concerns of respondents were that the state pension age would keep increasing; a future government might ask for the money back; and that the government may not tell the full truth about the policy.
One of the biggest obstacles to the Citizens Advance plan is that it would require higher taxes or higher borrowing. Although it looks as if today’s young people would simply be bringing forward a payment from many years in the future, accounting for it would be complicated.
It might be possible to structure the scheme a little like the student loan book, in which payouts now are matched by paying in later, which means that student loans are not counted as government debt, but there are bound to be upfront costs.
The SMF says that the contributory principle would be at the heart of the scheme – “only those who had garnered 10 years’ worth of national insurance credits would be eligible”. But the state pension is not a genuine contributory scheme: today’s pensions are paid out of today’s tax revenue, so any early payments would have to be funded the same way, unless private providers can be found to lend (some of) the money over the long term.
The other problem with the state pension is that its level is set by politicians. Currently, it is protected by the “triple lock”, a political promise that it will be uprated in line with prices, earnings or 2.5 per cent a year, whichever is higher. All the main parties subscribe to this policy, but it is hardly a bankable promise – indeed it was breached a few years ago because the bounceback from coronavirus lockdowns produced an artificial spike in the earnings figures.
I should declare an interest, as a member of the SMF’s advisory board, but this is an imaginative solution to the problem of the triple lock, which is that the state pension will gradually eat up more and more of the country’s resources – a policy that favours old people, who tend to turn out to vote more than young people.
The SMF policy is an attempt to transfer some of those resources from old people directly to their younger selves – although at the cost of having to delay drawing the state pension for a year longer.
