Thursday, 26 February 2009

It's My Pension and Screw the Lot of You!

Dear Lord Myners,

You telephoned me yesterday and asked me to consider voluntarily taking a material reduction in my pension entitlement as a "gesture" to acknowledge the level of Government support being made to Royal Bank of Scotland (RBS).

You highlighted that the absence of such a gesture would give rise to significant adverse media comment.

I outlined to you my view of the matter, but as I had not been expecting your call and as you expressly requested me to do so, I undertook to reflect on the matter again.

You emphasised that I would need to provide you with an answer ahead of the publication of the Group's annual report and financial statements sometime next week.

It came therefore as something of a surprise to find that both details of forthcoming 2008 financial statement disclosures relating to my pension and the substance of our telephone conversation had been placed in the public domain a few hours after we spoke.

In the circumstances, I feel that an earlier response to your request is necessary, and the purpose of this letter is to provide that.

Whilst my pension is the current focus of attention, there were a number of other aspects of my departure from RBS which need to be considered at the same time, particularly in the context of "gestures" and appropriate behaviour.

My contract of employment provided for a 12 month notice period, which I voluntarily waived in October of last year.

This amounted to a loss of 1 years' (sic) salary, and I discussed this with you at the time, when you indicated that it was both an appropriate and sufficient recognition of the circumstances.

Subsequent to this, you approached the chairman of the group remuneration committee to suggest that I should waive certain share related awards which would otherwise have vested upon my leaving the group.

Whilst difficult to value with precision, these had a value equivalent to about 3 months' salary at that time.

During these discussions, I am told that the topic of my pension was specifically raised with you by both the chairman of the group remuneration committee, and the group chairman, and you indicated that you were aware of my entitlement, and that no further "gestures" would be required.

On this basis, I agreed to waive my entitlement to the share related awards and proceeded to subscribe for my full allocation of shares in the ensuing share issue.

Like you, I believed that these gestures were appropriate in the circumstances, and sufficient, and revisiting the position today, I believe that they remain so.

I accept responsibility for that which I was responsible for, and recognise that my actions must be consistent with this.

I believe that they have been, and to voluntarily accept a reduction in a pension entitlement which has been built up over many years and in other employments in addition to RBS, is not warranted.

It is important to recognise that my pension arrangements have not fundamentally altered since I joined the group in 1998.

Whilst the quantum of the "pension pot" figure has increased, this is principally as a result of the assumption used last year about retiring at age 60 no longer being appropriate. The amount which I am due to receive as a pension continues to be calculated in a manner consistent with prior years.

Whilst I suspect that you will not now agree with it, I hope you can understand my rationale for declining your request to voluntarily reduce my pension entitlement.

In conclusion, since our private conversation yesterday is now in the public domain, I have no objection to the complete content of this letter being made public.

Yours sincerely,

Sir Fred Goodwin

-------- Now Lord Myners' Reply --------

Dear Sir Fred,

I am replying to your letter of earlier today, in which you informed me of your decision not to volunteer a reduction in your pension. I consider this unfortunate and unacceptable.

As I made clear yesterday in our phone call, I think such an act would be an appropriate recognition of the failings of Royal Bank of Scotland (RBS) under your tenure and the subsequent support the government has provided.

As I have already made clear, it was only last week that the Government became aware that the decision of the previous Board of RBS may have been a discretionary choice.

Once we became aware of this issue, UK Financial Investments (UKFI) has, on behalf of the government, been vigorously pursuing with the new group chairman whether there is any scope for clawing back some or all of your pension and whether, at the point the Board made their decision, it was made clear to the then remuneration committee and board that the scale of the pension payment was discretionary, as it now proves to be.

On the other points you raise in your letter, it is true that I expressed concerns over your 12-month notice period and certain share-related awards.

I welcomed your decision then to waive both these amounts.

That did not amount to approval of your pension arrangements given that, as I have outlined, I was unaware of any scope for discretion.

I do not agree with your rationale for declining my request that you voluntarily reduce your pension.

And indeed I hope that on reflection you will now share my clear view that the losses reported today by the bank which you ran until October cannot justify such a huge award.

Yours Sincerely,

Lord Myners

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