I’m no pensions expert but I have friends who are. Believe it or not, actuaries can be quite interesting people when you get to know them. My rigorous research over the past few days (buying pints for a couple of pensions wonks in a City pub) has led me to the conclusion that Harriet Harman was talking bollocks on the Andrew Marr show. I pretty much suspected that anyway, but it’s nice to have it confirmed by people who know what they are talking about.
It appears that there are only three ways that the government could force Fred Goodwin to give his £693,000 pension back. They are:
- Declare RBS bankrupt, in which case Sir Fred would only be entitled to £27,000 under the pension protection scheme.
- Pass the Make Sir Fred Goodwin Give His Pension Back Act 2009; in other words a special law aimed specifically at Sir Fred and others in a similar situation.
- Show that Sir Fred was in some way fraudulent or professionally negligent and that therefore he must forfeit his pension rights.
None of these options is especially attractive. The normally sane and rational Vince Cable is advocating the first. However, declaring RBS insolvent would surely damage what’s left of the bank’s reputation even further and make it even less likely that the taxpayers’ investment in the bank would be paid back. Those who advocate beating up RBS and its executives even more than we have been doing should remember that we now own 70% of the benighted bank. Declaring RBS technically bankrupt might get the £693,000 back but the fallout could be very damaging and end up costing the taxpayer a lot more.
Likewise, passing a special law would be costly and would take up a considerable amount of parliamentary time. Any law would almost certainly be challenged by Sir Fred in Strasbourg under the European Convention on Human Rights. Even if the government eventually won, the whole thing could cost more than £693,000. And that’s not to mention the sound arguments against retrospective legislation.
Accusing Fred Goodwin of fraud and negligence would, no doubt, be popular in Harriet Harman’s court of public opinion but it would be extremely difficult to prove in a real court. In any case, even if it could be proved, the amount the government could claw back would still be dependent on the forfeiture terms in the pension scheme. At this point my friends got into all sorts of technical detail and, having had a couple of beers, I glazed over. The upshot, however, was that they don’t think this option has a cat-in-hell’s chance of success either.
Like the bankers’ so-called contractual bonuses, Fred Goodwin’s pension is something that could have been dealt with at the time the government bailed the banks out but which it is now almost certainly too late to do anything about.
Fred Goodwin will most likely keep his pension and to suggest that the government can prevent him doing so at this late stage is naive. As Michael White says, if Harriet Harman was preparing for a leadership bid after the next election she has now blown her chances. One of the most important rules for political leaders must surely be to avoid digging yourself into a hole on the Andrew Marr show.