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Banker challenges PM Brown “failure should not be rewarded”

Sir Fred 'the Shred' refuses to give up his pension

Former Royal Bank of Scotland boss Sir Fred Goodwin has written to the Treasury indicating he will not voluntarily give up his pension, it has been revealed. Sir Fred is coming under increasing pressure to give up at least part of the pension, worth an estimated ?693,000-a-year, which he is already receiving at the age of 50 under an early retirement deal agreed with the RBS board when he was forced out last October.

Prime Minister Gordon Brown said the Government was looking at legal action to claw back the money, insisting that there should be "no reward for failure". But Treasury sources later revealed that Sir Fred has written to City minister Lord Myners to say that he is not ready to waive his entitlement. RBS announced a UK record ?24.1 billion annual loss, largely due to the disastrous strategy of corporate acquisitions pursued by the former chief executive - known as "Fred the Shred" for his ruthless cost-cutting. The losses led to a second state bail-out, which will see some ?325 billion of RBS assets placed in a taxpayer-backed protection scheme, while the Government extends its 70% stake in the institution by a further ?13 billion. News of Sir Fred's massive pension package sparked fury in the House of Commons as Chancellor Alistair Darling unveiled the new bail-out, with MPs branding the payments "obscene" and "grotesque". Mr Darling insisted that the package was not negotiated or approved by the Government. And he said ministers were aware in October of the former chief executive's pension arrangements but were under the impression that they were an unavoidable contractual commitment. It was only about a week ago that it was discovered that the then RBS board exercised an element of discretion in effectively doubling the size of Sir Fred's pension pot from ?8 million to ?16 million, said the Chancellor. He told MPs: "What we did know last autumn was that we were told there was a contractual agreement between the board of the bank and Sir Fred. What we didn't know - and it was only very recently that we became aware - (was) that the decision of the previous board to allow Sir Fred to take early retirement had the effect of increasing his pension entitlement and that that might have been a discretionary choice." However, in extracts from Sir Fred's letter, obtained by the BBC, the former RBS chief states that Lord Myners was aware of the arrangements for his pension at the time of his departure last autumn. He wrote: "I was told that the topic of my pension was specifically raised with you by both the chairman of the RBS remuneration committee and the group chairman and you indicated that you were aware of my entitlement." And he suggested that the enhanced pension package was intended as compensation for forgoing a year's salary in lieu of notice: "My contract of employment provided for a 12-month notice period which I voluntarily waived in October last year. This amounted to a loss of one year's salary and I discussed this with you at the time when you indicated that it was both appropriate and sufficient recognition of the circumstances." Speaking during a visit to Suffolk, Mr Brown said: "I am determined that we pursue, if necessary by legal action, cases where too much money has been taken out in cases where there is less justification that has been claimed for remuneration. Failure should not be rewarded. Practices are coming to light which have got to be dealt with".