Sir Fred Goodwin was not sacked, and had he been he would not be eligible for his controversial £693,000 a year pension annuity income he is drawing 10 years early from the Royal Bank of Scotland.
He took early retirement because he was asked to, and this triggered a clause in the company’s employment contract, rather than the “fired for cause” clause. RBS’s new chairman has confirmed that Sir Fred is drawing £693,000 per year rather than the £650,000 figure that has been reported.
The RBS pension scheme allows members who retire early at the request of their employer (RBS) to receive a pension settlement based on accrued service with no discount applied for any early retirement. So, he is much better off because of that clause. Lucky man!
According to a pensions consultant, buying a £693,000 annual pension income at age 50 would cost at least £25m, not the £16m that was previously believed, and 25% of this can be taken as a tax free cash lump sum. This consultant used the Financial Services Authority’s (FSA’s) own pension annuity calculator to work all this out.
Check out some annuity quotes yourself; the figures are truly enormous.
Many outside observers have pointed out that the Treasury and it’s army of lawyers should have been aware of the terms of Sir Fred’s contractual arrangements and so should bear part of the blame for the generous dismissal. Some even suggested the deal was green-lighted by the Treasury and accepted as the cost of getting rid of him.
Apparently, there were four parties to the negotiation of his compromise agreement. One was Sir Fred himself, one was the former chairman Sir Tom McKillop, one was a senior independent director, Bob Scott, and the other was the Government. Now the Treasury are saying that they only discovered last week that the clause in the contract may been discretionary.
Many politicians are now demanding that Sir Fred hands back much of the pension entitlement. Alistair Darling told the BBC that it was he who arranged for Lord Myners to speak to Sir Fred and quite simply ask him whether in the circumstances that the bank is now in whether he (Sir Fred) didn’t think it was right that he should forgo this generous settlement? Sir Fred hasn’t responded.
An interesting and unique problem that needs resolving. If you have issues that need sorting about your retirement plans, albeit small compared to this, speak to a specialist at Origen.