The cash transfer sum: what you get below two years' service
Almost everyone who leaves the armed forces with less than two years' qualifying service is told the same thing: you served too little, so there is nothing for you. That is right about the pension and wrong about everything else. Since 6 April 2006 the law has given short service leavers a separate entitlement called a cash transfer sum, and it does not depend on the two-year rule at all. This guide explains what it is, who has one, how it is valued, and why MOD has admitted that it never told a single person about it for nineteen years.
Key takeaways
- A cash transfer sum is the transferable value of the pension you built, available from three months' service, and it exists precisely because no pension vests below two years.
- It comes from the Pension Schemes Act 1993 (sections 101AA to 101AI), not from scheme generosity, so it applies to AFPS 75, AFPS 05 and AFPS 15 alike, and to reservists.
- It is valued as though the two-year vesting rule did not exist, then paid into another pension. It is not a cheque.
- The Act offers a choice of a cash transfer sum or a refund of contributions. In a non-contributory scheme like AFPS the refund is usually nil, so the transfer sum is the entitlement that pays.
- MOD admitted in December 2025 that it had never issued the statutory notice to anyone since 6 April 2006. Its accounts put up to 60,000 people and £45 million against the failure.
- You have not lost the right by waiting. The statutory clock only starts from a notice you were never sent.
What a cash transfer sum actually is
When you leave with at least two years' qualifying service, the pension you built is preserved. It sits in your name and is paid at your scheme's pension age. Below two years, none of that happens: the benefit never vests, so there is nothing to preserve and nothing to pay later.
The cash transfer sum exists to deal with exactly that gap. It is the cash equivalent of the pension you would have had, worked out as though the two-year rule did not apply to you, and made available to move into another pension scheme. You do not get a pension from the armed forces. You get the value of one, to take with you.
That distinction matters for how you read every other page on this subject, including older versions of ours. "No pension below two years" is true. "Nothing below two years" is not.
The right is created by the Pension Schemes Act 1993, sections 101AA to 101AI. It arises automatically on the day your pensionable service ends. It does not depend on the scheme telling you about it, and it does not depend on you applying in time.
Who qualifies: at least three months, under two years
The entitlement sits in a band. You need to have completed at least three months of pensionable service, and to have left before acquiring the two years' qualifying service that would give you a preserved pension. Above two years you have a preserved pension instead, which is the better outcome. Below three months, nothing arises.
Two further conditions decide whether you are in scope at all. Your pensionable service has to have ended on or after 6 April 2006, which is when the provisions came into force. And your service has to have ended before your normal pension age.
The three months does not have to be one continuous block. The Act lets you add together earlier periods of pensionable service under the same scheme, and periods of linked qualifying service under another scheme, so long as each counts towards qualification for long service benefit.
- Regulars who left in the band are in scope.
- Reservists are expressly included. MOD's own figures put up to 25,000 reservists in the affected population.
- People who opted out of the scheme rather than leaving the forces are in scope too, because the trigger is pensionable service ending, not employment ending.
- Anyone who left before 6 April 2006 is out of scope. The regulations apply only where pensionable service terminates on or after that date.
This is not an AFPS 15 perk
The AFPS 15 booklet describes a route below two years, and because it is the scheme booklet most people read, the route is widely written up as an AFPS 15 feature. It is not. It is a statutory right attached to membership of an occupational pension scheme, and AFPS is in scope through section 69(3) of the same Act, which covers schemes funded from public money.
Both legacy schemes set the right out in their own governing rules, not merely in the statute: AFPS 05 at rule F.1(3)(b) of the 2005 Order, and AFPS 75 at rule F.1(3)(b) of the Royal Warrant. The booklets may be quieter about it than the AFPS 15 booklet is. The rules are not.
This matters more than a technical footnote, because MOD's affected population runs from 2006 and is therefore mostly legacy-scheme members. If you served on AFPS 75 or AFPS 05, left inside the band, and were told at the time that this did not apply to you, that answer was wrong and you should ask again.
You may also see the right cited as "Chapter 5 of Part 4" of the Pension Schemes Act 1993, including in the AFPS 15 regulations. That is the same set of sections. The chapter was re-lettered to Chapter 2 of Part 4ZA in 2015 and the older label survives in scheme documents. Nothing turns on which name is used.
The two options, and why only one of them pays
The Act gives you a choice between a cash transfer sum and a contribution refund. The election is either or, never both: take the refund and you give up the transfer sum.
For nearly everyone in the armed forces, that choice is not a real one. A contribution refund returns the contributions you made on your own account. AFPS 75, AFPS 05 and AFPS 15 are all non-contributory: the pension is paid for by the employer and nothing is deducted from your pay for it. If you never paid anything in, there is nothing to refund, and the transfer sum is the only limb with a value in it.
The exception is if you bought extra. If you held an added pension contract or added years, those were your own contributions and the refund limb has something in it. Even then the two limbs are not equivalent: a refund is cash but is taxed under the short service refund lump sum charge, and taking it extinguishes the rights it relates to. A transfer keeps the value inside a pension and is not taxed at that point.
This is the precise sense in which "the armed forces schemes are non-contributory, so there is no refund" was always a half-answer. It correctly describes the refund limb. It says nothing about the limb that actually pays.
How the amount is worked out
The cash transfer sum is an actuarial calculation, not a return of anything you paid. It is the amount required to provide, within the scheme, the benefits you would have accrued if the vesting conditions had not existed. Because AFPS is a public service scheme, the discount rate used comes from Treasury guidance rather than from any investment strategy.
The practical consequence is that nobody can quote you a figure from your service length alone. It turns on your pensionable earnings, the months you served, your age, and the assumptions in force at the date your service ended. MOD has published no per-member value, no average and no range.
Be wary of any figure presented as "what early leavers are getting". The £45 million in MOD's accounts is a provision across the whole cohort and is already net of an assumption that only half of those eligible will come forward. Dividing it by the headcount does not give a per-person number.
Why almost nobody has ever had one
The Act does not just create the right. It also requires the scheme to write to you within a reasonable period of your service ending, explain what you are entitled to, tell you how to use it, and give you a reasonable period to decide.
MOD never did this. Not late, not inconsistently: never, for anyone, from 6 April 2006 onwards. The failure surfaced only in November 2024, when a single member brought an Internal Dispute Resolution Procedure claim, and MOD admitted it publicly in December 2025 in a one page notice and in the scheme's Annual Report and Accounts.
The scale is MOD's own: up to 60,000 ex-service personnel affected since April 2006, made up of around 36,000 who left regular service and up to 25,000 reservists. The accounts recognise £45 million of liability that had been treated as extinguished and has now been put back.
As at the Comptroller and Auditor General's report of 7 July 2026, the exercise to contact historic early leavers had not commenced, and the process changes for people leaving now were not yet in place. There is still no published contact route, claim form, deadline or timetable. If you are leaving with under two years now, ask before you go rather than waiting to be told.
None of that weakens your position. The statutory right arose on the day your service ended and does not depend on MOD telling you about it. The one thing that could normally end the right is failing to reply by a reply date, and a reply date only exists if the scheme sent you the statement that specifies one. Nobody in this cohort was sent one, so no clock was ever validly started.
What to do now
The honest position is that there is no process to join yet, so most of what is useful is preparation rather than action.
- Make sure Veterans UK can find you. The exercise has not started and MOD has not said how it will trace people. Current contact details with DBS Veterans UK are the most useful thing you can fix today.
- You can ask now rather than wait. The right already exists independently of the rectification exercise. You can write to DBS Veterans UK Pensions Division or JPAC and ask for a statement of your early leaver entitlement under sections 101AB and 101AC of the Pension Schemes Act 1993. Expect it to be slow.
- Line up a destination first. A cash transfer sum can only be paid into another registered pension scheme, a personal pension, an annuity purchase or a QROPS. If you have a workplace pension now, ask whether it accepts transfers in.
- If you bought added pension, compare the limbs before electing, because the refund is taxed and extinguishes the rights it relates to.
- If you are refused, use the dispute route. That is exactly how this was uncovered. Start with IDRP and go to the Pensions Ombudsman if it fails.
Do not pay a claims management company. There is no published claim process for anyone to navigate on your behalf, and nothing here that a free letter to Veterans UK cannot start. Treat any unsolicited offer to "release" or "unlock" an armed forces early leaver payment as a scam.
Frequently asked questions
James Hartley
James Hartley spent 22 years in the British Army, including unit personnel administration and pensions and records duties, and now writes the scheme guides and scenario pages on this site. He is not a regulated financial adviser, so the content is general information rather than personal advice.
Sources: gov.uk · GAD factors · Veterans UK · Forces Pension Society · MoneyHelper.