The ex-chief of nationalised bank RBS already voluntarily waived other certain benefits as part of his early retirement package, he said in the letter, such as his contractual 12 month notice period, agreeing to leave with the loss of one year’s salary.

Lord Myners accepted at the time that this “was both an appropriate and sufficient recognition of the circumstances.” he said, and therefore he will not give up any of his £16million pension pot.

On the grounds that no further “gestures” would be required on his part, Sir Fred also agreed to waive his entitlement to share related awards.

“Like you, I believed that these gestures were appropriate in the circumstances, and sufficient, and revisiting the position today, I believe that they remain so.” he told Lord Myners.

Lord Myners has responded to the letter by saying that, like the Chancellor, he was unaware at that time that this agreement could be altered at a later date.

Feelings over the pension have intensified as a result of RBS announcing record losses of £24billion.

“I accept responsibility for that which I was responsible for, and recognise that my actions must be consistent with this.” Sir Fred continued.

“I believe that they have been, and to voluntarily accept a reduction in a pension entitlement which has been built up over many years and in other employments in addition to RBS, is not warranted.”

His refusal to give up his pension could be politically damaging for the Government considering its pledge to crack down on City bonuses and giving rewards for failure.

© Fair Investment Company Ltd