Sir Fred Goodwin, the vilified former chief executive of Royal Bank of Scotland, refused last night to surrender his £693,000-a-year pension, claiming that the Government had approved it.

He put himself on a collision course with the Treasury on a day when RBS announced a £24.1 billion annual loss and received a second state bailout.

Sir Fred publicly spurned a personal plea from Lord Myners, the City Minister, and public demands from Alistair Darling and Gordon Brown, to give up some of his pension pot. It doubled to £16.9 million last October when he agreed to take early retirement.

Furious that the details of his pension arrangements and his conversation with Lord Myners had been made public, Sir Fred retorted in a letter that the minister had been aware of the deal and had twice sanctioned it personally.

That claim was denied throughout the day by Mr Darling and Treasury officials, but on their own admission there appears to have been no attempt to stop such a controversial payout.

Mr Darling, Mr Brown and the Treasury all insisted that they had only become aware in recent days that the deal to double the pension pot was not an unbreakable contractual agreement but discretionary. As a result, the Treasury is exploring all legal avenues to take some of it back.

Sir Fred wrote that Lord Myners was aware of the arrangement in autumn: “I was told that the topic of my pension was specifically raised with you by both the chairman of the RBS remuneration committee and the group chairman and you indicated that you were aware of my entitlement.”

He suggested that the enhanced package was intended as compensation for forgoing a year’s salary: “My contract of employment provided for a 12-month notice period which I voluntarily waived in October last year. This amounted to a loss of one year’s salary and I discussed this with you at the time when you indicated that it was both appropriate and sufficient recognition of the circumstances.”

Yesterday RBS benefited from a further £25 billion of taxpayer funding plus £325 billion of guarantees on its toxic assets.

Mr Darling told MPs that UK Financial Investments — the body that manages the taxpayers’ stake in the banks — had been asked to see if it could claw back some of Sir Fred’s pot. The Treasury said that RBS would review all aspects of his tenure to test any potential for legal redress.

Challenged over why the Government did not uncover the facts about Sir Fred’s pension when it took over RBS, Mr Brown’s spokesman cited the speed with which he had had to act to prevent the bank from collapsing.

George Osborne, the Shadow Chancellor, said: “Whichever way one looks at it, this obscene pension is unacceptable and the Government is on the hook. Either they did know and failed to act, or didn’t know and failed to ask the right questions. It is a totally irresponsible use of taxpayers’ money.”

The Treasury insisted that Lord Myners had not approved the deal but had been told it was not challengeable.

City sources said that Sir Fred and Lord Myners disliked each other long before RBS had to be bailed out. Last night Lord Myners described Sir Fred’s stance as “unfortunate and unacceptable”. In a letter, he reminded Sir Fred that the losses announced today were run up during his tenure and could not justify “such a huge award”.

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