Video: Harriet Harman questioned over Sir Fred Goodwin knighthood

Sir Fred Goodwin, the former chief executive of Royal Bank of Scotland, is considering leaving Britain to avoid the growing row over his pension payout of more than £30 million.

The Times understands that friends have advised Sir Fred to go abroad for several months and that he is “thinking about his options”.

It is also understood that Sir Fred is concerned about his children. “They were getting a pretty rough time,” one source said. The Scottish banker is believed to have taken John and Honor out of their schools temporarily last year after fears over their safety.

A spokesman for Sir Fred declined to comment on his plans.

If he were to leave Britain without offering to hand back some of his pension pot, it would infuriate the Government, which has urged him to return the money voluntarily.

It became clear yesterday that it would be hard to recoup any of his pension because the funds were signed off by Sir Tom McKillop, the bank’s former chairman, and Bob Scott, the bank’s top independent director.

UK Financial Institutions, the body set up to manage government-owned stakes in part-nationalised banks, has asked the law firm Slaughter and May to investigate whether the pair could be sued for signing off Sir Fred’s pension top-up last October.

The move is part of a broader legal review into whether anyone could be held to account for pay-offs to executives at RBS and HBOS, the bank now owned by Lloyds Banking Group.

Sources said that any legal action against Sir Tom or Mr Scott was likely to be led by RBS under its new chairman, Sir Philip Hampton.

Last week UKFI asked Sir Philip to look into a decision that allowed Sir Fred to take early retirement, which doubled his official pension pot from £8 million to £16 million. Independent actuaries say that these payments could cost the taxpayer more than £30 million.

Miller McLean, RBS’s general counsel, wrote to the Commons Treasury Select Committee yesterday detailing the role of Sir Tom and Mr Scott. “Sir Tom McKillop and Bob Scott were delegated to negotiate the specific terms to implement this decision,” he said.

It is believed that any legal action would rely on the fact that not all members of the RBS board agreed the terms of Sir Fred’s departure. In the event of a successful claim, Sir Tom and Mr Scott would be indemnified by RBS for any damages awarded against them, but RBS could then claim against its insurance policy.

Lord Myners, the City Minister, was criticised by MPs on all sides at yesterday’s Treasury Select Committe hearing for his failure to ask more questions about Sir Fred’s pension deal. But a source close to the minister said: “That weekend he was dealing with the fate of six banks and building societies. Sir Tom was dealing with just one thing — Fred’s exit package — and he didn’t say anything about there being an option not to pay it.”

It is understood that Lord Myners had a lawyer present throughout the negotiations with Sir Tom and that he repeatedly said that there should be no discretionary payments.

In his letter, Mr McLean said: “The pension terms were a consequence of the basis upon which it had been agreed that Sir Fred would be leaving the company, although we believe that no alternative basis for departure was discussed with Lord Myners.”

What they said about Sir Fred Goodwin

“The behaviour in RBS . . . is something that makes me angry and will make the public of the country angry . . . we are going to clean up the banks so this doesn’t happen again” Gordon Brown, February 27

“The losses reported by the bank which you [Goodwin] ran . . . cannot justify such a huge reward” Lord Myners, City Minister, February 26

“Reward for failure . . . I don’t think the remuneration committee or the board of RBS should have effectively increased, doubled I guess, a pension benefit in that situation” Glen Moreno, chairman of UK Financial Investments, March 4

“He should not be counting on being £650,000 a year better off as a result of this” Harriet Harman, deputy Labour leader, March 1

“I believe [we should] take it off him and let him sue in the courts.” John Prescott, Feb 27

“He has become the epitome of the bankers who collectively occupy a place in public opinion significantly lower than cannibalistic paedophile global-warming deniers” Boris Johnson, Mayor of London, March 3

Money Central: the top 5 foreign boltholes for disgraced bankers

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