So according to Sir Philip Hampton, chairman of Royal Bank of Scotland, Sir Fred Goodwin is “still thinking” about whether to renounce part of his pension. The bank’s former chief executive can take as long as he likes – after all, on £693,000 a year, why hurry? – but he really only has two possible models for his decision:
1. The Grasso. When New York state sought to claw back some of Richard Grasso’s $190m compensation, including retirement pay, the discredited former head of the New York Stock Exchange fought the claim. After four years, he won on appeal last July.
Sir Fred could judge that his reputation has now been so comprehensively trashed he has little to lose by resisting calls to reduce his pension package. He presumably has few other sources of regular income and, as Sir Philip pointed out on Thursday, the Scot has a “very strong legal contract”. The government – which was privy to the very deal it now excoriates – could insist that Sir Fred submit a detailed annual breakdown to parliament of what he bought with his pension (”Slippers: one pair. Pipe: one… etc.”). But suggestions it could pass a special law to trample over that contract are as absurd as they are dangerous.
That said, for Sir Fred to rely on the letter of this contract would be a flagrant breach of its spirit. Although Sir Fred’s reputation has reached bottom, he still has decades ahead of him. If he wants to rebuild a role for himself, he should renounce the Grasso gambit and opt instead for –
2. The Profumo. A year after he was brought down by a Sixties sex-and-spies scandal, John Profumo, then a government minister only slightly younger than Sir Fred, started work for a charity, eventually becoming its president, honoured by the Queen. His FT obituary in 2006 was headlined “Tolstoyan tale of hubris and punishment ends in redemption”. Sir Fred could spend 20 or 30 comfortable years railing against his tormentors. Or he could take this opportunity to start the slow crawl back towards a similar verdict on his life.
If he is to manage it, he really has only one option: to renounce most of the pension. How much? Without government support, the RBS pension scheme – now showing an accounting deficit of nearly £2bn – would fall into the Pension Protection Fund, the UK’s pension insurer of last resort.
Sir Fred should settle for the current PPF maximum pay-out of some £28,000 a year. That would represent a cut of 95 per cent – roughly equivalent to the peak-to-trough fall in the share price of the bank whose value he helped destroy.
