Fred the Shred\’s pension

Looks like it is indeed part of a contract:

It has emerged that Lord Myners, the City minister, signed off the deal which swelled Sir Fred\’s pension pot by a staggering £8 million, leaving the Prime Minister and the Chancellor facing serious questions over how much they knew about the payoff.

Lord Myners was involved in negotiations over the terms of Sir Fred\’s departure from the bank in October. He approved the formal document setting out the early retirement deal before it was signed by the outgoing chief executive.

I agree that many won\’t or don\’t like it and it may all be down to the stupidity of a Government Minister, but if we\’re to retreat from the idea that a deal\’s a deal, a contract is a contract (especially one actually signed by a Government Minister, however appalling or stupid it or he is) then I submit that as a society we\’re going to face much larger problems down the years than whatever letting Fred have his £650,000 a year for a decade is going to cost us.

16 comments on “Fred the Shred\’s pension

  1. As the Daily Mash shows today, those who live in glass houses shouldn’t be throwing rocks while shouting about undeserved pensions.

    Tim adds: Well, yes, although Brown has already said that he won’t be taking his special Prime Minister’s pension. The only person who has (as it was only set up recently) is Tony Blair.

  2. Rubbish. The form of words here is just that, a form of words.

    It was a bung, a bribe, a gift, a back-hander, a pay-off, an honorarium (if you like).

    Sir Fred played the government for fools (he was right) and commentators bleating on about contracts and honouring them as useful idiots.

  3. “Rubbish. The form of words here is just that, a form of words.”

    Urm, isn’t any contract or legal document “just a form of words”?

    I am not sure how, by making the obviously true statement that a contract is “just a form of words”, you have somehow demonstrated that therefore it is ok to breach it. My own contract with my employer is also “just a form of words”. I still expect to get paid at the end of each month according to the terms described in the form of words.

  4. “It has emerged that Lord Myners, the City minister, signed off the deal which swelled Sir Fred’s pension pot by a staggering £8 million”

    This is not a legal description of what happened but a journalistic cliché.

    When a sportswriter writes of the No 9 “sealing the deal” he means he scored a goal.

    But, heh, you carry on trying to justify taking the widow’s mite so that Fred gets his ill-gotten gains. You’ll get your reward in heaven.

  5. “But, heh, you carry on trying to justify taking the widow’s mite so that Fred gets his ill-gotten gains. You’ll get your reward in heaven.”

    Do you honestly imagine that all those arguing here for contracts to be honoured are actually secretly just friends of this guy that want to see him pocket our hard earned loot. What do I possibly gain by having this guy have a big pension paid out of my taxes. Why should you imagine that my motives are anything than what I state, which is that contracts are too important to be sacrificed just to spite a few bankers.

    If what you say is correct, and the payment is not contractually required I’d agree with you. However, neither of us have seen the contract, neither of us are experts in contract law, so I fail to see why you are so confident that there is no legal force to the payment.

  6. I fail to see why you are so confident that there IS legal force.

    All the reporting back in October ( I read it) was clear this was a bung, a bribe (etc, etc) to get him to walk away.

    As I’ve said here and elsewhere, Sir Fred should have been summarily dismissed for his reckless mismanagement of the ABN Amro bid. He could have had his day in court alongside all the other unfortunates and, perhaps, won his 12 month notice, shares (what are they worth now????) but been confined to his pre-walkaway pension rather than this grotesque parody of a pension that he now enjoys.

  7. “I fail to see why you are so confident that there IS legal force.”

    Mainly because I would guess if there wasn’t then he wouldn’t be receiving the money. I could be wrong and it may well not be a contractual obligation. However, if someone is making such a claim, I would expect them to have some evidence rather than simple cynicism about politics or the system.

    “All the reporting back in October (I read it) was clear this was a bung, a bribe (etc, etc) to get him to walk away.”
    From what you are saying above it seems therefore a contractual payment to do something, ie leave and not cause trouble. It may be (and probably is) a bad deal for us poor taxpayers. But if that was the deal that was signed, then it is now a contract and should be honoured. The time to be up in arms was before such a deal was signed, not now after the fact.

  8. GeoffH: Who should we blame, even if you are entirely correct and the rest of us are all wrong?

    Should we blame the guy who said: “Give me this and I will walk away”?

    Or should we blame the guy, who, while in charge of your money, said: “OK, then”?

  9. GeoffH, you are clearly a better man than I. If some government official offered me 650K a year, I would take it. Futhermore if they put it in writing, I would sue them should they ever try to take it away. I suspect many people would do likewise. Fred doesn’t have any obligation to me; my elected representatives do.

  10. No Chris,

    1) is extortion or demanding money with menaces or whatever else you may want to call it. And wrong.

    2) is incompetence. Equally wrong.

  11. “1) is extortion or demanding money with menaces or whatever else you may want to call it. And wrong.”

    Yes, extortion and demanding money with menaces is wrong, as are rape, murder, theft etc. What that has to do with Fred being one signatury to a contract I don’t know though.

    And I have to say I disagree with your heirarchy of wrongs. I think that extortion or demanding money with menaces is worse than incompetence. In fact given that incompetance implies someone lacks an ability in something I am not sure than incompetence itself is an evil, any more than not being able to do the 100m is 10 seconds.

  12. English law is based on precedent. Here in Canada we use English case law precedent and I feel that you English can do the same thing with respect to this former colony.
    Simply look at our Supreme Court ruling some decade past where it declared that a provincial government had in fact broken a contract it had with a group of farmers (Gross Revenue Insurance Program), causing them monetary loss, but nonetheless were entitled to do so. Case dismissed, in favour of the provincial government.

  13. The additional contribution of £8m to fund Fred the Shred’s early retirement on full benefits is discretionary, but if nobody in government has the wit to ask “How much will this cost?” then they all deserve the approbrium they get. The deed is now done and as you say ‘a contract is a contract’. But when you look at what the persent government has done to what was arguably the best private pension system in the world, what do you expect?

  14. The 2007 report and accounts make clear that if any RBS employee is requested to retire, a full pension (based on years of service to date) becomes payable). Why Brown/Myners/Darling or their officials can’t read this like the rest of us I don’t know.

    The discretion exercised by the RBS board was to ask him to retire rather than sack him. The increase in the ‘pot’ is an increase in the estimate of the cost of the pension, by changing the assumption from retiring at 60 (in 2007 accounts) to immediate retirement (now). As I understand it there was no increase in the amount of pensions awarded at the point of the ‘retirement decision’, as he had a contract entitling him to the pension he is receiving in the circumstances that have arisen. A more cautious assumption in the 2007 accounts (eg that Sir Fred might be asked to retire at say 50 – not unreasonable at the time of those accounts!) would have shown a pot of say £13-£14m.

    The CEO and FD of UK Plc (Brown and Darling) don’t appear to grasp some simple facts about corporate life or defined benefit pension schemes, which is a blow when they are responsible for mounting a takeover bid (aka rescue) on our behalf.

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