By Ian Pollock
Personal finance reporter, BBC News
Sir Fred in happier times in April 2007, before everything went wrong
There is a wailing and a gnashing of teeth throughout the land.
What to do about Sir Fred Goodwin's pension?
The former chief executive of the nearly insolvent Royal Bank of Scotland appears to have got away with a very good deal.
His pension, now that he has retired early, is said to be £693,000 a year - for most people an unimaginably large sum for, potentially, sitting around and doing nothing for the rest of your life.
This has caused a huge amount of anguish for the most senior figures in the government.
Lord Myners, the City minister, has asked him to give some of it back.
Over the weekend the leader of the Commons Harriet Harman said Sir Fred could not count on keeping the money.
And Gordon Brown has confirmed that the government is thinking of ways to change the law, to bring in some sort of claw-back arrangement.
The government is waiting for the top City law firm Slaughter and May to supply an opinion on its options.
But short of an Act of Parliament to somehow expropriate one man's pension arrangements, the government may be heading up a blind alley.
"There are very limited grounds for challenging the award of a pension," says Peter Lester, of the leading pension law firm Sackers.
The first thing to find out would be if the pension was given in accordance with the rules of the two RBS schemes of which Sir Fred was a member.
And Mr Lester makes the point that the pension fund monies do not belong to the bank, and certainly not to the government.
"The award of a pension is an award under the rules of the scheme - it's not necessarily company money," he says.
"You would need to read the governing documentation of the scheme to see if the rules were followed, if they were it's very difficult to see how anyone could do anything, apart from change the law."
Double your money
To fund the payment of Sir Fred's pension for an extra ten years, from the age of 50 rather than the age of 60, his accumulated pension pot was doubled in value, from just over £8.4m to nearly £16.9m.
It is interesting to note that paying an insurance company to provide such a pension would have been much more expensive.
That doubling seems to have been done within the rules - indeed it is the explicit policy for all members of the now closed RBS final salary scheme.
The bank's most recent annual report, for 2007, spells it out.
"All UK based directors [with a stated exception] are members of the Royal Bank of Scotland Group Pension Fund ("the RBS fund") and are contractually entitled to receive all pension benefits in accordance with its terms," it says.
"The RBS fund rules allow all members who retire early at the request of their employer to receive a pension based on accrued service with no discount [reduction] applied for early retirement," it adds.
If this applied to Sir Fred's departure, there was no discretionary augmentation and the pension was that provided by the rules.
The 1995 Pensions Act does make it possible for a pension to be clawed back if an employee has committed "a criminal, negligent or fraudulent act" against either a scheme or the employer.
Journalists hound Sir Fred at his Edinburgh home
Assuming that a rule with these terms has been included in the RBS scheme, then it might be invoked by the government, now the majority RBS shareholder, though it would involve court action to enforce it if Sir Fred fought such a decision.
So far, no one has accused Sir Fred of fraud or other crime, but has he been negligent?
"I don't know the circumstances, but it would be very difficult to establish," says Peter Lester.
The fact is, he ran the bank with the full support of his fellow board directors and indeed the majority of investors, so it seems he was certainly not acting alone.
If a new law to take back some of Sir Fred's pension was passed, it would be hugely controversial, despite a lack of public sympathy for him, and would raise issues as to whether his human rights were being violated.
It might also open the way for the government or other employers to do the same thing, just because they were a bit short of money.
Under pensions law, accumulated pension rights are pretty much sacrosanct.
How many pensioners would like it if their former employer asked them to suffer a cut in their pensions, just because finances were a bit tight back at the shop?
It would be a new concept that pensions should be performance related.
Would the idea apply to the pensions of others, such as MPs, chancellors and Prime Ministers, for instance?
Two pension schemes
One wrinkle in all this is that Sir Fred was a member of two schemes at RBS - the main one for all the staff, and another top-up version just for him.
This second type exists, as a private arrangement between an employer and a member of staff, because the law restricts how much of your annual income is pensionable each year in a scheme that attracts the normal tax advantages.
It seems that his top-up scheme had the same rule as that for the staff version - that there was a maximum 25% that could be taken as cash.
RBS would not say if Sir Fred has taken any such commutation payment, as it is called, and whether the £693,000 pension attributed to him is before or after a commutation payment.
But it throws up the possibility that if he has not done so, Sir Fred could yet convert a quarter of his £16.9m into £4.225m cash of straight away, rather than use it all to generate a monthly income.
So some of the money the government regards as ill-gotten gains may be even further out of reach than it thought.
And he could conceivably have spent it too.