Banker's £580,000 pension 'unjustifiable'

Published on Friday 19 March 2010 21:51

ALEX Salmond has stepped into the row over a senior Royal Bank of Scotland executive's massive pension, describing the award as "unjustifiable".

The First Minister hit out at the deal that gave Gordon Pell, RBS's second-in-command, a 580,000-a-year pension, despite the bank's near-collapse.

In a further intervention, Business Secretary Lord Mandelson said the UK government would "make its views known" about the pension, one of the largest in British corporate history.

Mr Pell, the deputy chief executive, was seen as one of Sir Fred Goodwin's right-hand men and last year defended his disgraced former boss, saying that his contribution would be recognised over time.

Mr Pell's huge deal was valued by RBS at 13.5 million. Had the bank been allowed to fail by the government, his pension would have been reduced to a maximum of 28,000 per year.

Mr Salmond, speaking at the annual conference of the Federation of Small Businesses (FSB) in Aberdeen, said: "I have argued consistently through the whole bonus and pension issue that when an institution moves into the public sector, then it has to accept public sector norms.

"It has to accept public sector pay norms and public sector treatment. It can't be both in the public and private sectors simultaneously."

The First Minister went on: "As long as institutions are publicly owned, then they have to accept the same restrictions that have been placed across the public sector, so I would have thought it is extremely difficult to justify and RBS should be extremely careful of their reputations."

Lord Mandelson, also speaking in Aberdeen, said: "We will make our views known about this to the bank. We think the bank should act with very great restraint."

The Scotsman revealed yesterday that UK Financial Investments – the body that holds Britain's part-nationalised banks to account – had considered whether to challenge Mr Pell's pension, but decided it would be too difficult to unpick.

There was a huge row over Sir Fred's pension which, under a departure deal organised with the RBS board in October 2009, was increased to 703,000 a year. That prompted a political storm, after the bank claimed ministers had been informed of the terms of the enhanced pension, and allowed it to go ahead.

Lord Mandelson used his speech to the FSB to once again criticise Tory plans to cut public spending straight after the election, if they win power.

The Business Secretary said: "It is public spending that is keeping people in jobs."

And he described the Tory plan as "all a bit 1980s".

Lord Mandelson also hit back at reports yesterday that he had paved the way for further tax rises on top of plans to increase National Insurance and the top rate of income tax.

Meanwhile, in his speech to the FSB shadow chancellor George Osborne said a Conservative government would "unleash hell" on red tape.

Although stopping short of a pledge to ditch Labour's planned increase in National Insurance, he nevertheless said that he would "work flat out to try" to achieve that.

"Of all Gordon Brown's planned tax rises, this is the one we most need to stop," he said

Mr Osborne also confirmed his plans to scrap National Insurance on the first ten employees of new companies who set up in the first two years of a Conservative government.