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MP's call to curb banker's pensions

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  • MP's call to curb banker's pensions

UK - A Bill designed to limit the pension provision of board members at banks wholly or partly-owned by the state is being introduced in the UK Parliament today.

The legislation is being introduced by Ann Clwyd, a backbench Labour Party MP, under the Ten-Minute Rule for private members' bills - a process which allows MPs to test parliamentary opinion on an issue, or to make a point about the need for a change in the law.

The Bankers' Pensions (Limits) Bill is scheduled to be introduced in the House of Commons this afternoon, and calls for the government to "make provision for the pensions of board members of banks that are wholly or partly in public ownership to be limited in certain circumstances".

Under the Ten-Minute Rule process, the MP is allowed to make a brief speech in favour of the Bill, and a member opposing the proposal can also speak, before the House decides whether to allow it to be introduced and have its first reading. If the introduction is denied then the Bill cannot proceed, and it is unlikely the Bill will succeed to the next stage without government support.

The proposal to limit bankers' pensions follows the controversy relating to the £703,000 a year pension granted to Sir Fred Goodwin, the former chief executive of Royal Bank of Scotland (RBS), which is now majority-owned by the UK government.

In a letter to John McFall, the chairman of the Parliamentary Treasury Committee, last week, RBS confirmed if the board of the bank had dismissed Goodwin, rather than allowing him to resign, his pension fund would be worth almost 50% less at £413,000 a year.

It also admitted that if RBS had gone into administration instead of being bailed out by the government then Goodwin's pension benefits would have been subject to the limits of the Pension Protection Fund (PPF) and capped at £27,770.

The scale of Goodwin's pension has raised questions about the rewards granted to those deemed to be responsible for the credit crisis, and has led the prime minister's spokesman to confirm the government is "exploring the legal avenues" in relation to potentially curbing Goodwin's pension payments.

Commenting on the matter, Paul Jayson, partner at consulting firm Barnett Waddingham, said: "The case of RBS and Sir Fred Goodwin is an exceptional one: it is unreasonable to expect the taxpayer to take on such a huge pension burden. In this case it is over and above that of a normal failed company which would have reduced its pension liabilities, the usual procedure for companies in such a position.

"We are therefore in complete support of Ann Clwyd MP's proposed bill and would welcome a change in the law to reduce the retirement income of such executives in a similar way to what would apply to a normal company that failed but isn't rescued for public interest reasons. Most taxpayers could only dream of a £16m pension pot," he added.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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