Northern Rock is giving its former chief executive a £760,000 payoff and a £346,000 pension top-up and is continuing to honour his cut-price staff mortgage.

The bank appears to have caved in to Adam Applegarth after initially expecting to pay him a much smaller sum. In December the bank indicated that Mr Applegarth would receive no more than £380,000.

Mr Applegarth, who was responsible for devising and implementing the bank’s disastrously flawed strategy, is being paid the golden goodbye in 12 monthly instalments of £63,000, according to the annual report, which was published yesterday. The value of his pension pot increased by £346,000 last year, the annual report reveals, and stands at £2.6 million. The accrued pension entitlement is £305,000 a year. Mr Applegarth, 45, will also continue to enjoy a concessionary staff interest rate on £75,000 of his mortgage from the bank until November, Northern Rock said, without disclosing the terms. The payoff is equivalent to a year’s base pay for Mr Applegarth, who left in December after announcing plans to step down in November.

Vince Cable, the Liberal Democrat Treasury spokesman, said that the payoff was “outrageous” and “a straightforward case of reward for failure”. Bryan Sanderson, who became chairman on October 19 and who stood down in February to make way for Ron Sandler, will keep his £315,000 fee and up to £85,000 for office costs. Mr Sanderson was responsible for approving Mr Applegarth’s payoff.

Northern Rock revealed that it had plunged to a £167.6 million loss last year, compared with a profit of £627 million in 2006. Mr Sandler said that he expected the bank to continue to make losses for the next three years before breaking even in 2011.

The extent of the flight by depositors during and after the run on Northern Rock last September was revealed for the first time: net outflow of funds during the year was £12.2 billion. However, Bank of England loans, which stood at £26.9 billion on 31 December, have been reduced to £24 billion.

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