Millions of younger workers could gain early access to a portion of their future state pension under a new proposal designed to help cover major life expenses long before retirement.
The Social Market Foundation (SMF) is calling on the Government to introduce a scheme known as the Citizens Advance, which would allow eligible workers aged between 28 and 40 to withdraw £12,548 from their future state pension entitlement.
Under the proposal, individuals would need to have completed at least 10 years in employment before qualifying for the payment.
In return, recipients would agree to work for an additional year before becoming eligible to receive their state pension.
The independent think tank has described the policy as a "state alternative to the Bank of Mum and Dad", arguing it could provide younger generations with financial support at a stage of life when major costs often arise.
It could be used to help fund expenses such as housing deposits, debt repayments or other significant financial commitments.
The current state pension age is 66, although this is scheduled to rise to 67 by March 2028 and then increase to 68 by 2046.
Supporters of the proposal argue that providing access to part of a future pension entitlement could help individuals address financial pressures earlier in life when the money may have a greater impact.
Rachel Vahey, head of public policy at AJ Bell, said the proposal could offer meaningful support for those struggling to save or manage financial commitments.
Workers could access £12,548 of state pension early under new proposal aimed at helping younger Britons
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Ms Vahey said: "The upside is people can access a significant sum of money at a time in their lives when it may be most useful, whether that's paying off debt, building savings or helping to buy a first home."
However, she warned that accessing the money early would come with long-term consequences.
"The downside is that in doing so they would have one year less of state pension income to rely on in later life."
She also questioned whether recipients would use the money for the purposes envisaged by policymakers.
Ms Vahey said: "Not just to repay a debt or buy a first home, but even a holiday, a car or new wardrobe."
She suggested uncertainty surrounding future state pension provision could encourage large numbers of people to take advantage of the scheme regardless of their longer-term retirement needs.
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How the state pension triple lock has changed over the years | GB NEWS/FIDELITY INTERNATIONAL"Given the uncertainty that exists around what the state pension will be in the future and when younger people might receive it, the lack of trust in governments will push large numbers of people into opting to raid the cookie jar as soon as they can."
Research conducted by the SMF suggests many potential recipients would use the money in ways that differ from the scheme's primary objective.
The survey found that only 16 per cent of respondents said they would use the payment towards a house deposit.
A larger proportion, 18 per cent, said they would prioritise paying off debts.
Meanwhile, 13 per cent indicated they would use the funds to build an emergency savings buffer.
The findings suggest that while housing affordability remains a challenge for many younger people, debt reduction and financial resilience may be more immediate priorities.
The proposal has also prompted wider discussion about the risks associated with accessing retirement funds before reaching pension age.
Mike Ambery, retirement savings director at Standard Life, warned that withdrawing money early can have a significant impact on long-term financial security.
He said: "Taking money out sooner doesn't just mean a smaller pot, it often means that pot needs to last longer as well."
He said this could leave retirees more exposed to financial pressures later in life, particularly if living costs increase or care needs arise.
Analysis by Standard Life highlights the potential impact of accessing retirement savings ahead of schedule.
According to the figures, a worker who starts employment at 22 on a salary of £25,000 and makes minimum pension contributions until age 68 could build a retirement pot worth around £210,000.
If that individual instead began withdrawing money at age 58, the value of the fund could fall to approximately £136,000.
The difference amounts to £74,000, illustrating the potential long-term cost of accessing retirement funds earlier than planned.
The Citizens Advance proposal has not been adopted by the Government, but it has added to the debate over how younger generations can be supported while balancing the need for financial security in retirement.