Tuesday, March 03, 2009

Six months and £114,000 later and its suddenly an issue?

Will someone, anyone, explain to me why there has been shock and outrage at the size of Fred Goodwin's pension? I mean it's not like its been some sort of secret for the past six months.

  • "[Goodwin] has an £8.37 million pension pot that will pay him £579,000 per year when he reaches the bank's retirement age." - Daily Telegraph 12th October 2008
  • "[Goodwin] has an £8.37m pension pot that will pay him £579,000 a year." - Haber 27 (Turkey) 13th October 2008
  • "[Goodwin] departure will be cushioned by a pension pot of £8.4m, worth £579,000 a year" - This is Hull October 13th 2008
  • "Goodwin has an £8.4m pension pot that will pay him £579,000 a year when he reaches retirement age." - The Guardian October 13th 2008
  • "Sir Fred said he would waive his right to a £1.2m payoff when he leaves, but he will be entitled to an annual pension £579,000." - The Independent 14th October 2008
  • "[Goodwin] has an £8.37million pension pot that will pay him £579,000 a year when he reaches 60." - Daily Mirror October 14th 2008
Are we to presume that now that the pot doubled, and he stands to get a £693,000 per year pension instead, that the extra £114,000 a year was just a step too far for the likes of Brown and Harman? Or more correctly are we to presume that the whole issue is a piece of spin to divert attention away from the far more pressing matter of the Government's incompetence?

More worrying I guess is the way so many of the newspapers have dedicated column inches to a story they already covered and hardly passed any judgement on six months ago. Amazing what £114,000 and a quiet word from the Downing Street press office can do huh?

27 comments:

Events dear boy, events said...
3 Mar 2009 14:18:00  

Glad you got there in the end. It has been obvious for a nearly a week that the Government has been using this as a smokescreen to cover up other bad news.

Brown also had the added bonus of rubbishing Harman after her silly comments at the weekend.

Stiletto said...
3 Mar 2009 14:26:00  

BBC news and the Dead Tree Press have both been partners in crime with Labour.

They all share responsibility for the crimes done to this country.

The DTP will have to be sorted out when we remove the Labour verruca.

Nothing is to remain the same.

Conand said...
3 Mar 2009 14:26:00  

I do like the labels of this post.

So, papers across the political spectrum were reporting the £579k pension (at age 60) in October. Myners appears to have been completely asleep when this changed to £693k at age 50. Despite the previous figures having been of public concern.
It is exasperating, but the whole story is piffling when compared to public debt, total stock market meltdown, a massive surge in unemployment, pre-existing public sector pension liabilities and yes, the Government's incompetence etc etc.

Anna Raccoon said...
3 Mar 2009 14:39:00  

Brown off to America to take advantage of the four and a half minutes Barack has allotted him in between seeing the Boy Scouts of Oklahoma movement, and the Allotment Growers of Alaska.........couldn't very well keep on using the 'It all started in America' line, so decided to revitalise the 'It's all Fred's fault' as a smokescreen?

Shaun Austin said...
3 Mar 2009 14:45:00  

Spin, deception, diversion, scapegoats, cover-ups!

It's basically all this shower-of-shite have left.

Demetrius said...
3 Mar 2009 14:53:00  

As a chap with an occupational pension at the modest level typical of most, it would take me 40 years to accrue the amount Fred gets in one year. As to the size of his pension fund, I would need to save all the interest on my savings for at least 60,000 years to match it. As I am 73, there could be a problem. You will understand why, and others, are not entirely happy. Especially as the RBS collapse has badly hit the property management service company for my flat, and this is now sending the annual service charges through the roof.

Lola said...
3 Mar 2009 15:25:00  
This comment has been removed by the author.
Lola said...
3 Mar 2009 15:27:00  

The answers are (1) It's all diversion tactics because Myners buggered up. (2) How did Myners bugger up. Read the earlier press reports. They all say that he has a (current) pension pot of £8m that will give him a pension of £572000 AT AGE 60. What the gummint i.e. Myers did was to agree/offer him a full pension from age 50. This requires the underlying fund to be doubled (broadly). If he'd taken the pension as of age 50 and with the fund accumulated to that date - or more precisely the CETV/Notional fund so accummulated, his pension would have been much less. Also it is likely that it would have been actuarially reduced by say 1/2% per month.

So, service (both RBS and transferred in) of say 28 years. Accrual rate of say 1/60the gives 28/60ths of pension entitlement. But as he is taking it at age 50 there will be a much greater cost to the fund. So average state sector practice is to reduce the pension by 1/2% pcm. Hence 10 years times 12 months times 1/2% = 60% REDUCTION.

So let's estimate his pensionable pay:-

572000 / 38 x 60 = 903157 Let's call that an even Million.

His pension at age 50 should have been:

£1m / 60 x 28 x 60% = £186,667.

So there you have the problem.

Fred's pension has gone from £186,667 to £693,000 thanks to useless Mr Myners, the gormless Mr Darling and the deceitful Mr Brown.

PS I realise that these numbers are not entirely accurate - but they are in the ball park.

dizzy said...
3 Mar 2009 15:29:00  

OK, the point here really is that he was always going to get a whopping great pension anyway that no one seems to think was in anyway obscene in October when he walked from RBS. At least no one complained.

Can't say I agreew ith your maths, not because I think s its wrong just because...well its pensions.

Lola said...
3 Mar 2009 15:39:00  

The point is that Brown/Myners/Darling let it multiply by 3.7 times. A pension of £186,667 is till very generous, but about what a very senior civil servant will get. And that pension was all he'd earned from service with a private business - which is entirely entitled to pay what it likes - within the law. Once the business was bust and was bailed out by the gummint the money - notional or actual - used to bump up Fred's pension was mine and yours. Brown/Darling/Myners were therefore very careless with our money.

Again or still. Take your pick.

dizzy said...
3 Mar 2009 15:42:00  

Yes, but its worth noting that the pension was not 186K when he stood down but was 579K per year from 60.

So the point is not just that they let it rise by letting him have it early, but more so the fact that no one seemed to give a shit about the size of it when he first stepped down.

Hence smoke and mirror and spin

Lola said...
3 Mar 2009 15:51:00  

Yep, agreed. But the spin is also because they've just realised that they've cocked up and that blokes like me can work out roughly by how much.

In effect - using rounded figures - 580,000 - 200,000 = 380,000

Assume pension yield of 4.5%

380,000 / 4.5 x 100 = 8.44m ! Quelle Surpise! There's your £8.5m. That's what Brown/Darling/Myners have cost us.

If Fred had gone to age 60, got his £579k p.a. on the back of a successful bank no-one would have given a rats arse. B/D/M now, as you say, need a diversion tactic. Fred's pension is ready made for it.

dizzy said...
3 Mar 2009 15:54:00  

Blokes like you? Bbbbbbbut Lola is a girls name! I DEMAND a recount!

J.C.G. said...
3 Mar 2009 16:25:00  

Did you meet her in a club down in old soho? Where you drink champagne and it tastes just like cherry cola?

Lola said...
3 Mar 2009 16:32:00  

Hahahaha - I aim to confuse. Shows you haven't read my profile. And before you speculate, I'm not.

Lola said...
3 Mar 2009 16:53:00  

J.C.G. - among other things. It was a Lazy Sunday Afternoon, just before Sunset, in Waterloo, if you must know.

RobertD said...
3 Mar 2009 16:53:00  

Fred's £8.4 m pension pot was actually published (deep in the notes) in the RBS Annual Report for 2007. An obvious start point reading for anyone contemplating a sizable (£20bn+) investment in the bank. Anyone with any exposure to the work of actuaries (and as the author of a report of the futue of pensions in the UK Myners surely can't claim he didn't have such an exposure) would guess immediately that moving the payment date forward from 60 to 50 in a final pay based scheme requires a massive increase in the size of the pot to fund it. Yet he claims he didn't consider it a matter important enough to even ask the relevant questions.

Any lawyer or accountant advising on an investment that made such a mistake would expect a sizable malpractice writ winging in their direction with the speed of light. .... But since it's only taxpayer money who cares!!!

Dick the Prick said...
3 Mar 2009 18:01:00  

Good shot.

Lola said...
3 Mar 2009 21:24:00  

RobertD - eggsaktly - and if I make a similar mistke of much smaller proportions the FSA could simply close me down. I could lose eevrything - business, home, chattels. But hat happens to B/D/M? Bugger all.

Anonymous said...
3 Mar 2009 22:01:00  

What many people are overlooking is all the accumulated knowledge Myners has. He's a bright bloke who has worked on pensions, so he knows the way pensions work. He has also been kicking around boardrooms for a long time, so he knows the way payoffs work.

Hence, he didn't even raise his eyebrows at any of this: it all just seemed the way that things get done.

... and I'm not too sure the government is that upset about all of the scandal. An extra 8MM is nothing in the scheme of things, but it is taking the heat off them for a few days ...

Anonymous said...
3 Mar 2009 22:34:00  

... and 2 other quick thoughts.

1. The government will never legislate to retrospectively take the money. I'm not sure Gordon Brown et al would be that comfortable with a law which gave an outside authority the ability to take benefits because of incompetence. There are more than a few key performance indicators that they have also failed on.

2. Many people have made reference to old boy networks etc. This is way too simplistic, and misses the essential point of Fred Goodwin's character. Scottish, not educated at a public school, and not been to Oxbridge: he is doing all of this, including sticking two fingers up at the government, BBC, public opinion, his old colleagues, etc. - because he is NOT part of the old boy network and is proving just how tough / clever he is. At least, that is what he tells himself.

Benedict White said...
3 Mar 2009 23:48:00  

Whilst the government is using this as a smolescreen for its on incompetance, the real issue is the retirement age.

The government could have looked at the issue closer and if the board who paid Sir Fred £16 million as a pension pot, could have had thei pensions cut before they left.

This is all one big cockup from start to finish and Labour´s hands are all over it.

Air Nokia One said...
4 Mar 2009 07:46:00  

I originally posted the comment on Guido's blog in regard to this and pointed out the Hull paper article showing that Brown had to have known despite his/their denials. They have I noted said they only became aware on 19th Feb??? WTF?.
Max another poster then tracked that back to main headlines in the Moneymail and the mail at the time. Your post confirms the fact that this was common knowledge at the time throughout the general press.

Yes then this was solely a smokescreen thrown up by Labour but with the obvious conflit of truth whay are they not challenged by the same DTP. What was this covering though? Check carefully what has been rolled out to the public over the last week by Labour because something horrible and frightening lies there. Meanwhile the labour hypocrites can huff and puff in the court of public opinion about this. The likes of spliff and Mandleson for example.

John Moss said...
4 Mar 2009 08:51:00  

Demetrius,

There is no way that the collapse of RBS can have any impact whatsoever on the service charge on your flat.

The charge can only be made up of the costs spent on maintaining the place, plus a reasonable management fee.

The only possible impact is that any sinking fund is now earning a smaller rate of return so has to be increased to compensate. As most sinking fund contributions are around £300pa having to compensate for lost interest cannot add a huge amount. If you have built up such a large sinking fund that the interest on it is paying some of the maintenance costs and this is now not happening, then spend some of the capital in the fund, it is obviously higher than it needs to be to cover expected large future capital spend.

If your managing agent is using this as an excuse, they are pulling the wool over your eyes and I recommend you get a reputable local Chartered Surveyor to look into it for you.

curly15 said...
4 Mar 2009 10:12:00  

The whole story is perfect hogwash isn't it,anyway let the bloke have a break!

Jim said...
4 Mar 2009 10:27:00  

Isn't the point that they could have dismissed him (and his pension would have been about £400k a year instead) with 12 months' notice? That would have saved taxpayers £300k a year, as I write on the ft blog:

http://blogs.ft.com/westminster/2009/03/how-sir-freds-pension-is-703k-instead-of-416k-a-year/

bofl said...
4 Mar 2009 10:27:00  

as usual it is all a smokescreen.....

these people are truly pathetic.....
comparing themselves to Chuchill then spreading lies like vicous soap characters.

what about Blairs pension? how much does he get per person killed?

or snafflegarth (n.rock)?

no rewards for failure?

oh dear, i just quoted another lie!


 

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