Sir Fred: My pension cut "not warranted"
Thursday, 26 February 2009 08:00
Sir Fred Goodwin has stated he has no intention of 'doing the right thing' and giving up his £693,000 pension, despite the bank announcing the largest annual losses in British corporate history.
Hours after RBS announced annual losses of £24.1 billion, chancellor Alistair Darling called on the former Royal Bank of Scotland chief executive to forego the pension.
But after telling MPs that the "ball is in his court", it emerged that Sir Fred had written to the Treasury to confirm he would be doing no such thing.
In a letter to City minister Paul Myners, Sir Fred wrote: "To voluntarily accept a reduction in a pension entitlement which has been built up over many years and in other employments in addition to RBS, is not warranted."
He added he felt he had already made "appropriate" gestures, such as waiving an entitlement to share-related awards and leaving the company without one year's notice and so foregoing one year's salary.
The falling RBS share price has also cost him some £5 million.
"I believed that these gestures were appropriate in the circumstances, and sufficient, and revisiting the position today, I believe that they remain so," he wrote.
It has been revealed that when the government was in talks over rescuing RBS - which resulted in the bank now being 70 per cent owned by the government - Sir Fred agreed to a series of "gestures", but the Treasury did not specify that he could not claim his pension.
There is also speculation the Treasury failed to realise the pension payout was discretionary and could be cut.
The government has since acknowledged that it could have prevented Sir Fred from claiming his pension - which he is already doing despite being only 50 - if it had specified this during the bailout talks.
In a letter of reply to Sir Fred, Lord Myners wrote: "I consider [your decision not to volunteer a reduction in your pension] unfortunate and unacceptable.
"As I made clear yesterday in our phone call, I think such an act would be appropriate recognition of the failing of RBS under your tenure."
He added the government was now "vigorously pursuing. whether there is any scope for clawing back some of all of your pension."
Lord Myners concluded: "I do not agree with your rationale for declining my request.. And indeed I hope that on reflection you will now share my clear view that the losses reported today by the bank which you ran until Ocotber cannot justify such a huge award."
Although lawyers are looking at the possibility of stripping Sir Fred of his pension, Mr Darling today was reduced to appealing to the executive's better self.
"We've got the lawyers looking at this," Mr Darling told the Today programme.
"But I do think that on a voluntary basis, actually, Sir Fred could resolve this problem and he could do it quite quickly."
For Sir Fred to be stripped of his pension, it would have to be proved he was negligent, which is thought to be unlikely. And pension lawyers claim without any loopholes in the pension agreement, the government has little room to move.
"I think that is a scandal," said Treasury select committee chairman John McFall told the BBC.
"He is leaving with not just a good pension, but a pension that is eye watering."
Sir Fred defended his pension in the letter.
"It is important to recognise that my pension arrangements have not fundamentally altered since I joined the group in 1998," he wrote.
"Whilst the quantum of the 'pension pot' figure has increased, this is principally as a result of the assumption used last year about retiring at age 60 no longer being appropriate. The amount which I am due to receive as a pension continues to be calculated in a manner consistent with prior years."
Sir Fred also hit out at the Treasury for making his conversation with Lord Myners public.
"You telephoned me yesterday and asked me to consider voluntarily taking a material reduction in my pension entitlement as a 'gesture' to acknowledge the level of government support being made to RBS." he wrote.
"You emphasised that I would need to provide you with an answer ahead of the publication of the group's annual report and financial statements sometime next week.
"It came therefore as something of a surprise to find that both details of forthcoming 2008 financial statement disclosures relating to my pension and the substance of our telephone conversation had been placed in the public domain a few hours after we spoke."
He concluded: "Since our private conversation yesterday is now in the public domain, I have no objection to the complete content of this letter being made public."
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