Committee publication · Estimate memoranda · 10 February 2026
Armed Forces Pension Scheme Supplementary Estimate Memorandum 2025-26
From: Defence Committee
Summary
This memorandum sets out the Armed Forces Pension Scheme (AFPS) and Armed Forces Compensation Scheme (AFCS) supplementary estimate for 2025-26, requesting additional Resource AME of £5,201m and net cash of £1,759.6m. The AFPS is an unfunded defined benefit scheme financed by employer contributions and Exchequer funding. The supplementary estimate reflects increased current service costs driven primarily by a 4.5% military pay award and higher interest costs compared to the previous year.
Key findings
- Resource AME increased by £50.0m (0.97%) from the original Main Estimate 2025-26, primarily due to additional current service costs from higher pensionable military payroll.
- Resource AME is £383.5m (7.96%) higher than final outturn 2024-25, predominantly driven by increased interest costs on scheme liabilities.
- Net Cash Requirement increased by £462.4m (35.65%) compared to 2024-25, due to increased pension costs.
- Current service cost rose from £2,251.14m to £2,520.98m (12.0% increase), reflecting the 2025-26 military pay award of 4.5%.
- Employer contributions increased by £210m (4.3%) to £5,097m, reflecting higher pensionable military payroll forecasts.
Tone
ProceduralTopics
Key actors
Ministry of Defence, Treasury, Armed Forces Pension Scheme, Armed Forces Compensation Scheme
Notable line
“The AFPS budgets are not subject to pre-set Departmental Expenditure Limit (DEL) control totals; they sit within a category of spending known as Resource Annually Managed Expenditure (AME) …”
Key Quotes
“Scheme (AFCS), is an unfunded defined benefit scheme, in which payments to pensioners are funded by employer contributions, with the shortfall being financed by the Exchequer.”
“… the increased pensionable military payroll referred to below creates additional current service costs within 2025-26.”
“The key driver of this increase being the 2025-26 military pay award of 4.5%.”
Source · parliament.uk record ↗