KNIGHT of the realm and former Royal Bank of Scotland boss Sir Fred Goodwin had the temerity to say how sad he was to be leaving the firm. He even highlighted how painful the current situation was for shareholders, employees, and himself personally as a major stakeholder in the company.
Perhaps some of Goodwin's sadness and pain will be alleviated by the £8.4 million he has stuffed into a bulging pension pot worth significantly over half a million pounds a year when he comes to retire.
With over a million shares and almost half
a million share options in the beleaguered bank, there is no doubt that the collapse of the RBS share price will have a significant impact on his wealth.
However, for the thousands of employees who have been encouraged to save their hard-earned wages and invest them in the company over the years, the collapsed share price will have a much more detrimental impact on their finances. Save As You Earn (SAYE) schemes allow employees to save money over a period of three to five years. Contributions to these schemes attract tax breaks and accrue interest as with a regular savings account.
At the end of the stated savings term, a bonus is also paid. Employees can then use the money to buy shares in their company at a discount and employees at not only RBS, but banks throughout the UK, have been doing this in their thousands.
The nightmare for these employees who have used SAYE schemes to buy a stake in their company is that the shares they now own have become virtually worthless. Of course ups and downs are expected in stock prices, but when a total collapse in the value of shares comes on the back of poor company management, employees have every right to be furious.
Indeed, now that the government is going to buy into many of the high street banks, dividends will be suspended until this investment has been off-loaded back into the private sector. So not only have employees seen the value of their shares smashed to smithereens, but they also have to sit back and watch as dividend payments over the coming years go up in a black cloud of smoke.
For many employees approaching retirement, the shares they had built up in their company were meant to be a valuable additional source of income. For others, SAYE schemes were a way of saving in a tax- efficient way to build up a deposit to get on to the housing ladder, buy a new car or put towards a holiday.
Given the complete implosion of many banking share values, employees who have built up a decent holding to use for these things will now have to find their money from elsewhere or forgo these pleasures.
Looking at Edinburgh alone, there are over 15,000 employees at RBS and HBOS. Then there are all of those employees who have retired in recent years, but were using their shares to supplement their pension.
This is not a criticism of SAYE schemes, which provide an efficient and effective way to put money to one side. However, because of the spectacular crash in the banking system, those who have done all of the right things to save for a rainy day have found themselves unfairly and unduly punished.
Goodwin may be sorry to be leaving the bank and worried about the value of his shares, but nowhere near as worried as the employees he oversaw.
• Eric Nisbet is director of Independent Insolvency Practitioners, a company operated co-operatively by 25 independent insolvency firms in Scotland.
