The post you are reporting:
PaulB - his 'pension' is now something of a mystery to me.
It was revealed today that this £16m built up since he assumed his position at RBS in 1998. To have built such a sum in a conventional pension, final salary or money purchase, over the 10 years or so that he has, particularly given prevailing investment conditions, he would have had to breach the funding rules for approved pension schemes. I suspect that would not have happened as the scheme would have been governed by trustees and there would be penalties if rules were breached.
To give you an example, the maximum accural rate for a final salary pension (pre April 2006) was 1/30th. In other words the maximum pension would be reached in 20 years with a 'cap' applying to its size. On that basis his pension should be around 1/20th of what it is now, at the most.
The funding rules did change in 2006 and are more generous in some ways but not in respect of the maximum total sum, there is now a 'Lifetime Allowance' of £1,650,000. That means his pension is 10 times the maximum we are now allowed to accrue without a penal tax rate applying.
The likely answer is that this pension has been accrued via a unapproved scheme called a FURB. He would have paid tax on the contributions, rather than benefit from tax relief as per an approved pension.
I suspect that he had a bit of each with the much smaller part being the approved tax relievable scheme.
I also suspect, given all this, that the money has built up in an investment and he is being paid via a drawdown from the invested pension. This means that there will not be future pension liabilities for RBS or the taxpayer, at least from the main unapproved (FURB) part of the pension. I think it unlikely that the FURB would be a defined benefit pension, I have only heard of money purchase FURBS (FURBS are rare beasts anyway)
It is possible that the smaller unapproved scheme will have a future liability for the company or taxpayers, but not if it is what we call money purchase, if that we have no liabilities at all.
Incidentally if the fact that he has a pension 10 times what we are now allowed to have does not annoy you enough, legislation will stop any of us retiring (with a pension) before age 55 from next year. So he got away with it that way too.
