The armed forces pension scheme, administered by MOD, is responsible for payments of pensions to former members of the armed forces. The scheme is funded partly by the MOD, and partly by a separate MOD vote. The 2007-08 main estimate net cash requirement for the pension scheme totalled £1,689,057,000. Due to unforeseen pension pressures in the 2007-08 year, a cash shortfall of £150,000,000 was identified within the overall pension scheme.

Parliamentary approval for additional resources of £150,000,000 has been sought in the 2007-08 spring supplementary estimate for the armed forces pension scheme. Pending that approval, urgent expenditure estimated at up to £85,000,000 will be met by repayable cash advances from the Contingencies Fund.