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With Sir Fred Goodwin and Bob Quick receiving controversial pension payouts, the question is: in what circumstances can forfeiture occur?

Few people have received such negative press in recent years as Sir Fred Goodwin, the former CEO of the Royal Bank of Scotland (RBS). He refused to surrender an annual pension of £703,000, even though RBS was rescued by the Government and suffered the largest-ever yearly loss in UK corporate history. The latest reports indicate that the Government is taking legal action to clawback some of the pension.

Similarly, Bob Quick, the former head of anti-terrorism for the Metropolitan Police, was criticised when it was revealed he would receive a pension of £110,000 a year despite the circumstances of his resignation. (He resigned from his post after allowing top secret documents to be photographed.)

The size of the pensions in question – vastly in excess of what the average pensioner would receive from an occupational pension scheme – has obviously contributed to the controversy.

But it must be remembered that a pension is earned by past service and so the law restricts the circumstances in which an employee’s pension can be forfeited. This follows the line recommended by the influential 1993 Goode Report on Pension Law Reform which, while not favouring complete abolition of the ability for pension benefits to be forfeited, suggested that forfeiture should be narrowly defined by legislation.

The consequent Pensions Act 1995 allows forfeiture only in the following circumstances, but the rules of the specific scheme would also have to allow the forfeiture to occur:

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