Royal Bank of Scotland has confirmed that its former boss Sir Fred Goodwin has volunteered a 'substantial reduction' to his controversial pension.
His annual pay-out will fall from £555,000 to £342,500 a year, after his pension pot is cut by £4.7m. Despite leading the bank to the brink of disaster, his overall pension package was worth £703,000 a year, but Goodwin has already taken out a lump sum of £2.7m.
British Chancellor Alistair Darling said he was 'very glad' that RBS had now resolved the issue.
RBS chairman Philip Hampton said Goodwin had voluntarily approached the bank to alter his pension arrangements after an internal investigation found there were no grounds for reducing the award.
'This issue has been a serious distraction from allowing us to focus on the real problems facing the company and many other banks,' Mr Hampton said.
Goodwin's pension stoked investor and public resentment over bankers' bumper pay deals when detail of his retirement package emerged in February, prompting the government and RBS to explore ways of clawing back part of his award.
Shareholders rejected the bank's directors' pay report by a majority of over 90% at its annual general meeting in April, in a move widely interpreted as a protest against Goodwin's pension deal.
Goodwin quit as head of RBS last October after the bank was forced to surrender a majority stake to the British government in return for a £20 billion taxpayer-funded bail-out.
RBS, financially stretched by the 2007 acquisition of Dutch rival ABN Amro and hit by losses on risky credit-backed assets, last year reported a loss of £24.1 billion, the biggest in British corporate history.
Today's move marks a climbdown for Goodwin, who denied as early as April that he was considering any voluntary reduction in his pension. He has previously maintained he had a contractual right to the pension and that he expected the bank to fulfil its obligations.
He had rejected government and public pressure to accept a reduction in his package, insisting in a letter to City Minister Lord Myners in February that changes to the early retirement deal he negotiated when he was forced out in the autumn were 'not warranted'.
