Fred tells RBS: I will not shred my pension

He was said to be considering a voluntary reduction in his £17 million retirement pot.

But a source said Sir Fred — dubbed "Fred The Shred" for his cost-cutting — has not changed his mind and felt he had fulfilled all his contractual obligations to RBS and the bank should pay him the pension he was entitled to.

Before the bank's annual meeting in Edinburgh today, chairman Sir Philip Hampton had claimed: "I have asked Fred if he would take a voluntary reduction in his pension and he is considering it."

The AGM follows the most disastrous year in the bank's 282-year history. RBS posted the biggest loss in UK corporate history, £24.1 billion, and is now majority-owned by the taxpayer after a £20 million bail-out last October.

Small shareholders have seen the value of their investments in the bank fall by up to 90 per cent.

On the question of Sir Fred's pension, John Macpherson, a shareholder from Edinburgh, said: "If he wants to move in polite society and wants a good future then he should do the decent thing. I have the advantage of being able to hold my head up in public without thinking what kind of shyster I am. He should get some self-respect."

Another "small shareholder", Andrew Kirkhope, from Hamilton, said: "I want to make sure the auditors are sacked because they did not do their jobs. All non-executive directors should go as well. They were supposed to look after our interests."

Sir  Philip had said the new board was taking fresh legal advice over whether it can change Sir Fred's contract to cut his pension.

The Government today used its 58 per cent stake in RBS to vote down the remuneration report which effectively approved the early pension pay-outs to Sir Fred and Johnny Cameron, the former head of the investment banking arm. But it was only a symbolic gesture as the vote was advisory and not legally binding.

Sir Philip opened today's meeting with a request for the "embarrassing" stories about RBS to be put behind it to allow staff to nurse the bank back to health. He said: "The majority of RBS staff in the UK earn less than £21,000 a year They do not deserve to share the worst of the criticisms being laid at the door of their employer."

But Sir Philip also heard shareholder John Waterson voice "grave reservations" about some of the bank's directors — particularly Gordon Pell and Guy Whittaker, who were both on the bank's previous board. "It begs the question: why are these two individual gentlemen still on the board of directors at Royal Bank of Scotland?" Mr Waterson asked, to applause.

"Far from continuing with them as members of the board — I am sure I speak for a lot of people in this audience — all of those board members should be in jail."

Sir Philip also warned of more job losses at RBS on top of the 2,700 announced already.