Former Royal Bank of Scotland (RBS) chief executive Fred Goodwin has refused to hand back a pension package worth £16.6m.
RBS revealed this week that it made a £24bn loss last year, on the same day the government injected another £13bn into the ailing bank, following a £20bn bail-out last year. Political and public pressure grew on the banker to forgo his £693,000-a-year pension, which was largely seen as rewarding a massive failure.
But writing to Paul Myners, the minister responsible for financial services, Goodwin said he was not giving up the pension. He said he had already waived any share entitlements and the 12-month notice period owed to him, and alleged the minister had said any further “gestures” on foregoing his pension arrangements would not be necessary.
The government now faces political embarrassment over the pension award from what is now a publicly owned bank.
Myners has since admitted knowing that the pension pot was £16m, but said he thought it was a contractual obligation.
The Treasury is now consulting its legal means on whether the decision to grant Goodwin his pension at the age of 50 can be reversed.
Stephen Timms, the Treasury minister, told the Times: “If he declines the request that has been made, then we will pursue all the legal avenues that are open to us, because most people will find this completely indefensible.”
Last week, Northern Rock announced plans to pay bonuses to thousands of staff despite a reported £1.4bn loss last year. The scheme will pay 100 senior executives deferred bonuses for 2008 in the form of loan notes – essentially an ‘I owe you’, where the company agrees to make payments to the note’s holder at a specified future date.