Sir Fred Goodwin, former chief executive of the Royal Bank of Scotland, yesterday agreed to hand back more than a third of his yearly £555,000 pension.

A deal was agreed by RBS, the Treasury and UK Financial Investments that will see Goodwin now take home a mere £342,500 a year.

Goodwin - known as ‘Fred the Shred' - led RBS to a full year loss of £24bn in 2008, a corporate record that forced the bank to accept a government bailout of £45bn.