Sir Fred retires on £650,000 per year

Published on Thursday 26 February 2009 00:10

ANGRY ministers last night vowed to take steps to "claw back" some of the pension of former Royal Bank of Scotland chief executive Sir Fred Goodwin after it emerged he was already drawing £650,000 a year.

Stephen Timms, the Treasury minister, said the current RBS board was "extremely concerned" after it emerged Sir Fred was already benefiting from his 16 million pension pot, even though he was only 50. He is due to receive the pension for the rest of his life.

The pension disclosure comes as the now 70 per cent state-owned bank is expected to announce record losses today of up to 28 billion.

Sir Fred – known as "Fred the Shred" for his ruthless cost-cutting – is widely seen as the architect of the bank's disastrous strategy of corporate acquisitions which led to RBS's downfall.

Mr Timms said: "I think the new board of RBS is absolutely right to be extremely concerned about this. UK Financial Investments, which manages the government's shareholding, has been working with the new chairman and the new board to see what scope there may be for clawing back some of this payment."

An RBS spokesman said: "The company is taking further legal advice in respect of Sir Fred Goodwin's contractual arrangements and continues to discuss the issue with the UKFI."

Mr Timms insisted the government was determined to clean up the banking system.

"This is another example of the culture of rewards for failure that we are determined to sweep away for the future," he said.

The chairman of the Commons Treasury committee, Labour MP John McFall, said the government should try to get some of the money back. He said: "There is a case for redress here. There should be a claw back."

However, the senior Tory on the committee, Michael Fallon, said: "Ministers must have known this when they took over the bank back in October. They must have known what his pension arrangements were. That pension should have been stopped. This is public money in the end – 650,000-a-year for life – that's wrong."

In a statement issued last night, the Treasury said that since they became aware of the issue, UKFI was "vigorously pursuing" it with the chairman of RBS, Sir Philip Hampton, to see if there was "any scope for clawing back some or all" of Sir Fred's pension entitlement.

Ministers also want to know whether the RBS board had taken the decision to allow Sir Fred to retire "in the full knowledge of the facts" the Treasury said.

It is understood UKFI drew the matter to the attention of ministers within the last ten days, prompting fury in the Treasury. It came to light as new chief executive Stephen Hester and his team trawled through the books of RBS as they reviewed every aspect of the business and prepared for the publication of results today.

John Park, Labour's economy spokesman in Holyrood, said: "It is morally wrong for Sir Fred to receive such a huge pension when so many workers at RBS are facing redundancy."

Gordon Banks, Labour MP for Ochil and South Perthshire, called for an immediate investigation into the "extremely inflated" pension pay out.

He said: "People across the country will be extremely concerned that taxpayers' money that is meant to go into bailing out a bank is being siphoned off in such a way that one individual who was largely responsible for its downfall stands to benefit."