Connected Research

Union policy research in the 21st century

Fred shreds some of his pension

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Sir Fred Goodwin is reported right across the media (try, just for a change from other sources, the Scotsman) to have voluntarily agreed a ‘substantial reduction’ in his annual pension, to £342,000 from £555,000 (the £700,000 figure widely reported seems to be the figure of his total pension, including an annualised figure in respect of his £2.7m lump sum, which he has already taken). The reduction in total pension is in the order of some £4.7m – a fall of just over one-quarter on the £16.9m estimated to be the total value.

Nevertheless, this still leaves him comfortably better off than he would have been if he had been paid a pension from 60 – the Royal Bank’s normal retirement age – based on service up to that date, as opposed to receiving a pension paid up to age 60 but drawn from age 50, which has been the case since he left employment (NB Robert Peston at the BBC has some maths which ‘prove’ differently). This still sounds like a reward for failure to me, as well as one which is substantially different from the treatment that ordinary employees would have faced in comparable circumstances. I’m naturally suspicious of witch-hunts – and there are plenty of elements in all this which describe it as such – but I’m even more sceptical where rules are transparently being applied to workers on a differential basis depending on their hierarchical position, and that’s clearly what we have here.

Agreement seems to have been brought forward as a result of Sunday papers reporting his £4m hideaway in the French Riviera, although part of the reason for Sir Fred being willing to reverse his earlier, adamant stance that he would not return some of his pension appears to be the result of an internal RBS inquiry which concludes that Sir Fred’s conduct did not justify a reduction in his pension (defined benefit pension schemes do sometimes have rules allowing for reductions in pension where there is fraud, negligence or gross misconduct). Political support for the move as ‘the right thing to do’ has already been forthcoming, so it looks like we’ve reached the stage of ‘settlement reached…. time to move on’.

Sir Fred’s status in history is already assured but the move may indeed help focus the Royal Bank’s energies on resolving its future, not least on behalf of the staff who remain in the company. This would no doubt be a worthwhile result, although Unite, which represents members in the bank, has contrasted his ‘diabolical failure’ with the comfort that will still be afforded to him on the reduced terms.

A more than fair farewell pop, in the circumstances.

Revised and expanded since first being posted.

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Written by Calvin

18/06/2009 at 2:28 pm

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