Revealed: The 1am deal that doubled Sir Fred's pension just before Treasury stepped in
SIR Fred Goodwin's pension pot nearly doubled after an 11th-hour agreement was reached by members of the former board of Royal Bank of Scotland, it was revealed yesterday.
Sir Fred, the former chief executive of the bank, is to receive 703,000 a year for the rest of his life – 10,000 more than previously reported – after a deal was agreed by Sir Tom McKillop, the former chairman, and Bob Scott, chairman of the bank's remuneration committee, plus human resources department staff.
The disclosure was made in a letter to the Treasury select committee from Miller McLean, group general counsel and group secretary at RBS.
The news came as UK Financial Investments (UKFI), the body created by the government to deal with its stakes in the part-nationalised banks, tried to blame the deal on former members of the bank's board.
In its letter, RBS said that Sir Fred could have been left with just 27,770 a year if the bank had been allowed to go bust – the maximum under the government's pension protection fund.
If he had been fired rather than asked to retire early, his pension would have been cut to 416,000 a year, plus 12 months' salary (around 1 million).
The letter from the bank's senior lawyer also suggested that Mr Scott had "summarised" the deal to Lord Myners, the city minister, the day before it was officially announced.
And it says: "While there were other discussions about Sir Fred's package, RBS does not believe there was any further discussion of his pension terms.
"The company has no record of whether any questions were raised about the pension terms by Lord Myners."
On Monday, Lord Myners told the House of Lords he had not approved the deal. He said he had not been told exactly how much Sir Fred would be paid, although he had been made aware it would be a "large sum". The RBS board had not said the money was discretionary, he said.
This evidence will renew pressure on Lord Myners to explain why he did not ask questions about whether the payment could be reduced.
John Kingman, the chief executive of UKFI,
told the Treasury Select Committee that ministers and officials had not been informed that Sir Fred's pension was "partly discretionary" when he was ousted last October.
The deal was finally agreed by the RBS board at 1:30am on Monday, 13 October, just hours before details of the rescue were announced to the Stock Exchange by Alistair Darling, the Chancellor.
Mr Kingman said: "The reason it's discretionary is that his entitlement to an undiscounted pension from the age of 50 stemmed from a decision of RBS that he should be treated as retiring at the request of the employer.
"Had those concerned decided instead simply to terminate the contract, as RBS could have chosen to do with 12 months' notice, the right to an undiscounted pension would not have applied. The consequence of this decision was roughly to double the value of Fred Goodwin's pension pot."
However, Mr Kingman said that UKFI and the government had only found out what had happened on 19 February.
He named Sir Tom and Mr Scott as the "key decision-makers" involved in approving the deal.
The UKFI chairman, American financier Glen Moreno, told the committee: "I regard this completely as reward for failure … I think it is wrong."
Michael Fallon, the senior Conservative on the committee, said it appeared to be either "a nod and a wink, banker-to-banker deal between Lord Myners and Fred Goodwin" or "sheer, blundering incompetence".
There were sharp exchanges at the start of the hearing when the committee's chairman, John McFall MP, rebuked Mr Kingman and Mr Moreno for failing to provide details of remuneration and bonuses at the Treasury-backed banks, even though they had been asked for the information last Friday.
It also emerged yesterday that, until the end of January, Sir Fred was an adviser to the government on regulation. He was one of a number of senior bankers on the Treasury's High Level Group.
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