Breaking news reports from Sky this morning suggested that Sir Fred Goodwin was considering repaying part of his controversial £703,000 per annum pension.

Sky's Business Editor Jeff Randall said: "I understand that the Government, through UKFI and the Royal Bank of Scotland, are preparing a statement saying that Sir Fred Goodwin will be making a concession on his pension, giving some of that enormous pension back."

RBS has now confirmed the position and at 13:00 hrs made an official announcement through the Regulatory News Service of London Stock Exchange stating that Goodwin has volunteered to make a substantial reduction to his pension which will now be£342,500.

Under the departure arrangements agreed in October 08, Goodwin was due to receive an annual pension equivalent to £703,000 per annum. This payment was available immediately to Goodwin on retirement at age 50 without discount, i.e. as if he had retired at age 60. In line with the scheme's rules, in February 09 Goodwin elected to exchange part of his enhanced pension for a lump sum with a remaining annual pension of £555,000. Goodwin has now volunteered to reduce his annual pension to £342,500, which reduces the total value of the pension by £4.7 million.

In March 09, the Chairman of RBS initiated an internal inquiry into Goodwin's conduct in relation to expenses and the use of company assets to assess whether this would provide the Company with an opportunity to revisit the original pension arrangement. The Group has concluded this review and found there was no wrongdoing or other misconduct on Goodwin's part in this regard that would justify reducing the pension. Commenting on the resolution the Chairman of RBS, Philip Hampton said: "On any measure this represents a very substantial reduction to Fred's pension and is an acceptable amount to all parties to the discussion. I am very pleased that we have resolved a situation that has been a difficult and unhappy one for all the parties involved, and it is to  Fred's credit that he has done this on a voluntary basis."

For some shareholders this gesture may be too little, too late to rehabilitate unquestionably one of the most hated public figures of the Credit Crunch.  The delay between the original announcement of Goodwin's unprecedented pay off and the proposed pay-back will undoubtedly lend credence to an intense and bitter fight over Goodwin's "Golden Goodbye". It looks clear from Hampton's comments that no pay-back was likely to take place while a cloud of suspicion hung over the former CEOs head. Now that the review has given the all clear, negotiations are under way to settle the matter.

The Goodwin pension problem has thrown the hidden cost of executive pensions into the spotlight this proxy season; expect more pressure on boards to cut payments for failure and take a more equitable approach to pensions.