Downing Street Says » Royal Bank of Scotland

Asked about Sir Fred Goodwin s pension, the Prime Minister s Spokesman (PMS) told the assembled press that the Chancellor had made it very clear in the House earlier today that the decision on pensions was a decision for the then RBS board.

Put that Fred Goodwin could have been sacked or asked to resign, instead of being given early retirement, the PMS referred people back to what the Chancellor had said in the House; we did know last Autumn that there was a contractual agreement between the board of the bank and Sir Fred Goodwin. What we did not know and what we only made aware of recently was the decision of the previous board to allow Mr Goodwin to take early retirement had the effect of increasing his pension entitlement and that might have been a discretionary choice.

Our understanding had been that there were contractual obligations here and it was only recently that it had become apparent that there may have been an element of discretion. Asked if that was because the Government had been misled or that it failed to ask the question, the PMS said that since we had taken our majority ownership in December, the new management had been going through the books thoroughly. This was primarily to clean up the balance sheet of the institution as per the announcement today, but these other issues had come to light as well.

Put that the only thing the Government had learnt recently was that there was a discretionary element and it already knew the contents of the contractual agreement, the PMS said that we knew there was a contractual agreement and the broad elements of that. What we did not know was that there may have been elements of discretion that significantly enhanced the pension pot.

Asked whether the Prime Minister knew Mr Goodwin was being offered early retirement on full pension, the PMS said that the Prime Minister did not know of the specifics of the pension arrangements until very recently and Ministers were not aware that there was potentially some elements of discretion over the decisions that resulted in a significant enhancement of the pension pot. Asked which Ministers were aware of the situation in October, the PMS said that people should speak to the Treasury. Ministers were aware that there was a contractual agreement but what we did not know was that there may have been an element of discretion involved in decisions that were taken to enhance the size of the pension pot.

Asked how the Government learned that there was an element of discretion, the PMS said that this was something that came to light as the management of the board were going through the books. Asked if the Prime Minister was happy that it had only come to light now, the PMS said that as the Treasury had said yesterday, since they had become aware of the issue, UK Financial Investments had been vigorously pursuing this with the new chairman and they had been vigorously pursuing whether there was any scope for clawing back some or all of this pension entitlement.

Put that pensions must have been set out in annual accounts, the PMS said that they would have been, but the annual accounts for last year had not been published yet. Put that there was a clause that had said that if anyone took early retirement they were entitled to a full and undiscounted pension, the PMS said that he would have to check on the specifics of that, but the pension entitlement was set out in the annual report. The 2008 annual report had not yet been published and would come out in the next few weeks. Asked if he was confident about the figure of 16million, the PMS said that on specific figures, he would refer people to the Treasury or to RBS.

Asked if the Prime Minister had contacted Mr Goodwin, the PMS said that the channel of communication between Sir Fred Goodwin and the Government had been Lord Myners. Put that if Lord Myners knew back in November that the pension pot was this large, why did he not raise it at the time, the PMS said that the pension entitlements of the directors would normally be published for a public-listed company in the annual reports.

Asked why the books hadn t been gone through thoroughly in October, the PMS replied that we only took ownership of the bank in December and we had to act quickly in October in order to prevent the bank from collapsing. We then took majority ownership in December and the new management and UK Financial Investments had been working together pouring through the books.

Asked repeatedly whether the quick action was the reason for the oversight, the PMS said that it was a matter of record that we had to act very quickly, in order to take the action we did in October. Asked why Lord Myners didn t say the figures were wrong, the PMS replied that RBS were a publicly listed company and there were rules for the disclosure of pension arrangements. Asked how it had emerged if it was something that should not have been reported, the PMS said that he did not know how it had emerged.

Put that it had taken 4-6 weeks to go through the books, the PMS said that they had been going through the books to look at all of the assets and liabilities of RBS as part of the process of cleaning up the bank. Asked whether they had only got to the pensions after this amount of time, the PMS replied that RBS was a very large bank with a very large balance sheet. Asked if there were other directors who would be retiring soon with pension liabilities, the PMS said he did not have that information.

Asked repeatedly why the Government did not satisfy itself that the board of the bank had approved this pension, the PMS referred people to the Treasury statement yesterday; since they became aware of the change in the pension entitlements for Sir Fred Goodwin, UKFI and the new chairman had been vigorously pursuing whether there was any scope for clawing back some of this and whether the board took the decision in the full knowledge of the facts.

Asked why no one in Government had gone through the books in October, the PMS said that we did not have majority ownership of the bank in October. The Government did not take majority ownership until December and it was only at that point that we became the majority shareholders. UKFI, set up in October, had been working intensively with the management of the bank to go through the assets and liabilities of the bank.

Asked whether the Prime Minister had a view on what should happen to Mr Goodwin if he did not want to give part of the pension back, the PMS said that as the Prime Minister had been saying today, we would explore every legal avenue to examine what the scope was to claw back some of this pension. Asked if the Government was willing to change the law, the PMS repeated that the approach being taken was to examine the nature of the contract and legal obligations that had been entered into, to see what the scope was to claw some of the pension back.

Put that as legal avenues were being examined, could people assume that Mr Goodwin did not want to give any of the pension back, the PMS said that Sir Fred Goodwin s position was a matter for him. Asked if UKFI had reason to believe that the board were not told either, the PMS said that since UKFI became aware of the issue, they had asked the Chairman of RBS to establish whether the board took the decision in the full knowledge of the facts and that was something that was being looked into.

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» Thursday, February 26, 2009

Royal Bank of Scotland

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