Page last updated at 16:55 GMT, Tuesday, 17 March 2009

Row over Sir Fred pension advance

Sir Fred Goodwin
Sir Fred's pension has been a major controversy

There is uncertainty about whether Sir Fred Goodwin will pay back a £2.7m advance on his £16.9m pension pot.

Earlier on Tuesday, Treasury Minister Lord Myners told MPs that Sir Fred had pocketed that amount.

In response, RBS said its former chief executive might return the advance if certain conditions are met.

The issue has deflected attention away from Lord Myners role in the approval of Sir Fred's pension after the government stepped in to rescue RBS.

Lord Myners reiterated that he had not approved Sir Fred's pension deal.

Tax assurance

Sir Fred resigned from RBS in October after the bank needed a government rescue, and has continued to refuse to agree to have his pension reduced.

Lord Myners says he "did not negotiate, settle, or approve" Sir Fred's pension

BBC Business Editor Robert Peston said Sir Fred's £2.7m pension advance had actually been worth £4.5m, because RBS had agreed to pay his £1.8m tax liability on it.

He added that Sir Fred has agreed to pay back the money, "so long as he can get an assurance from HM Revenue & Customs that the tax man won't come after him for the... tax that would - in theory - still be due".

Such an assurance has not been forthcoming.

If Sir Fred ends up keeping the £2.7m, his annual pension income would go down from £703,000 a year to £555,000, but its overall value would not be reduced.

'Beyond comprehension'

Lord Myners has found himself at the centre of the storm surrounding Sir Fred's pension after accusations that he effectively signed off the £16.9m package.

Speaking to the Treasury Committee on Wednesday he once again denied that this had been the case.

"The decision on the pension was made by the board directors of RBS. I made no decision," he said.

Lord Myners said he had been "very clear" with RBS and the other banks that there should be "no rewards for failure" and that payments for departing directors should be minimised.

He added that it was "beyond my comprehension" that RBS directors had not exercised their discretion to reduce Sir Fred's pension.

"Someone at RBS took the decision to treat him [Sir Fred] more favourably than required," said Lord Myners.

'Quite straightforward'

He said RBS was wrong to think it had no choice but to give Sir Fred his full pension from the age of 50, because this arrangement should only have been available to employees voluntarily retiring early.

"Sir Fred Goodwin didn't have the option of staying. The board had decided he must go," he said.

He added that the RBS board could have dismissed Sir Fred with just 12 months salary.

"It would have been a quite straightforward and simple thing to have done," said Lord Myners.

As an expert in pension funds, Lord Myners became financial services minister in October 2008, as the government was negotiating taking large stakes in RBS, Lloyds TSB and HBOS.

Last month, RBS reported that it made a loss of £24.1bn in 2008 - the largest annual loss in UK corporate history.

The government now owns a 68% stake in the lender.

Print Sponsor

Can they catch Sir Fred's pension?
02 Mar 09 |  Business
Goodwin's pension hits 703,000
03 Mar 09 |  Business
Harman warning on Goodwin pension
01 Mar 09 |  Politics
Governor raps 'gamblers' reward'
26 Feb 09 |  Business
Former banking bosses say 'sorry'
10 Feb 09 |  Business
New firm to oversee bank shares
03 Nov 08 |  Business

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific