Workers need 35 years of NICs to be eligible for the full state pension, although those with between 10 and 35 years will receive reduced payments.
An ageing population combined with the triple lock – which sees the annual state pension payment rise by the highest of 2.5pc, average wage growth or inflation – means the cost of the state pension has risen rapidly.
The annual bill is projected to hit £171bn by the end of the decade, according to calculations by wealth manager Quilter.
Missing out on pension growth
The rising state pension could also mean young people taking the payments miss out on bigger payouts later.
Assuming an annual increase of 2.5pc, by the time a 28-year-old begins receiving their state pension, it will be worth £33,689 a year, Telegraph analysis found. This is more than double the £12,548 payout young workers would receive early.
Steve Webb, former pensions minister and partner at pension consultants LCP said: “If the advance is only available to those aged 40 or under, the savings to the Government in reduced state pensions will not accrue for more than a quarter of a century. In the meantime, the Government could pay out over £100bn in advances to younger people.
“This does not feel like a well-targeted policy or one that is likely to find traction in a world where most politicians have a time horizon not much beyond the next general election.”
Young workers taking the full £12,548 to use as a house deposit would face monthly mortgage payments of £1,314 on a 25-year mortgage at 3.75pc, for an average UK house priced at £268,132.
The SMF is not the only think tank to support raiding pension savings early. In 2025, the Lifetime Savings Initiative said that first-time buyers could be allowed to take up to 25pc of their pension savings early to afford a home deposit.
Last year, The Telegraph reported that Torsten Bell, the pensions minister, was considering allowing workers access to £1,000 of their retirement savings at any age, as an “emergency savings pot”.
In 2024, the Resolution Foundation – which was run by Mr Bell before he entered Parliament – argued that savers should be allowed to borrow up to 20pc of their pension pot, or £15,000, as a loan, with the money then repaid through higher contributions at a later stage.
A Department for Work and Pensions spokesman said: “Unlike other savings, a state pension cannot be rebuilt once accessed ahead of time, meaning those who do so may find themselves with reduced income later in life.
“We want to help people reach major life milestones, such as buying a house, which is why we are boosting housing supply and addressing the cost of living head-on through initiatives such as taking money off energy bills to put more money in people’s pockets.”