A new row erupted over the pension for Sir Fred Goodwin today when MPs were told the former Royal Bank of Scotland chief executive had taken a £3m lump sum from his £16.9m pension pot – and the bank had paid 40% tax on the payment.
The City minister, Lord Myners, told the Treasury select committee that the board of RBS was “in denial” and had “bent over backwards” to be generous to Goodwin, its departing chief executive, last October when the bank was on the brink of collapse.
Myners revealed that Goodwin had agreed to repay the lump sum, provided his pension entitlement was increased.
It later emerged that the exact sum withdrawn was £2.7m, at a cost to RBS of £4.5m when the tax payment is taken into account, and that Goodwin had not yet returned the sum because there was no agreement with the Revenue that he would not be liable for tax.
Related article: Ministers ‘to sue’ RBS directors over Sir Fred Goodwin’s pension (Telegraph)
Myners, who was accused by MPs of being “bloody naive”, revealed more details of Goodwin’s “extraordinary” pension agreements. The bank treated Goodwin as though he had joined the pension scheme at the age of 20, rather than at 40 when he actually joined. None of his pension savings from previous employers were included in the scheme and 50-year-old Goodwin was allowed to choose his 12-month earnings figure from the best year in the previous decade.
Documents released by the committee show that Peter Cummings, the HBOS executive who ran the division which caused record-breaking losses at the bank, has also been allowed to retire immediately even though he is only 53. He is receiving £352,000 a year after HBOS, now part of Lloyds Banking Group, treated departing executives as if they were made “redundant”.
Myners, facing hostile questions from the committee, insisted that the doubling of the pension for Goodwin to £703,000 a year was taken by the board of the bank and not by him. The City minister has had a high-profile battle with Goodwin, calling on him to hand back some of the extra pension which, he argues, the bank did not need to pay. Myners told MPs: “I still hope there’s the opportunity for Sir Fred to do the right thing and either return some of his pension or make a very, very substantial and long-term commitment to charity both of money and of his undoubted energy and resources. Sir Fred can mitigate even at this stage.”
Myners, who was on the board of NatWest when RBS launched a hostile takeover bid 10 years ago, said RBS was warned by the remuneration consultants Watson Wyatt that the decision to double Goodwin’s pension pot to £16m would not be approved by the bank’s shareholders.
“I think it is quite outrageous that a man who led a bank into the largest banking failure ever, a bank that depends on public support, should see a departing executive drawing a weekly pension of £13,000.
“It does give an overall picture of a board of directors bending over backwards to be generous to Sir Fred. There was a real sense of denial at that time. I was dealing with people who for the first time were realising the serious state of affairs,” he said.
He said he had been told during the weekend of 11-12 October when the bailout was being orchestrated that the non-executive directors would resign if chairman Sir Tom McKillop was forced to leave as well as Goodwin. Myners also said that Bob Scott, the non-executive director who had handled negotiations with Goodwin, had suggested they could “spread out” the disclosure of Goodwin’s full pension.
Myners insisted he had no regrets about how he handled himself over that weekend. “I developed a script for these meetings … There should be no rewards for failure, payments to departing executives should be minimised.”
But the Conservatives insisted he had failed in his duties to the taxpayer. The shadow chancellor, George Osborne, said: “Gordon Brown appointed Lord Myners to look after the taxpayers’ interest and to keep an eye on the banks. He has completely failed to do that and it is the taxpayer who is paying the price.”
Wednesday 18 March 2009 01.48 GMT
Source: The Guardian