Royal Bank of Scotland shareholders have overwhelmingly rejected the bank’s remuneration report, which includes the £703,000 pension payment to former chief executive Sir Fred Goodwin.

Some 90.42 per cent of votes cast at the annual meeting in Edinburgh rejected the report. UKFI, the government body that controls a 58 per cent stake in RBS, had already said it would vote against. It is the lowest vote in favour of a remuneration report in UK corporate history, according to Manifest, a voting adviser.

Furious shareholders described Sir Fred, who was controversially granted early retirement aged 50 from the stricken bank, as a “benefits scrounger” and there were loud cheers when one suggested Sir Fred and all the other former directors should “go to jail” for what they had done to the once proud Scottish institution.

Sir Philip Hampton, the new chairman, told the 600-strong audience he had employed “more lawyers than you can shake a stick at” to examine whether Sir Fred’s pension contract was watertight. He explained later that two City law firms plus legal counsel were scrutinising the terms of Sir Fred’s contract and this work should be completed in the next few weeks.

Sir Philip also revealed he had spoken to Sir Fred earlier this week and asked him again whether he was planning to reduce or give some of his pension pot to charity. He said Sir Fred told him he was still considering this.

“We are leaving no stone unturned to see if the contract is completely solid,” Sir Philip said.

“I understand the frustration from shareholders and the public …the terms were designed to be helpful to the business …I agree the outcome looks very strange indeed,” he said.

Friends of Sir Fred Goodwin say he has fulfilled all his obligations to the bank and expects RBS to fulfil all obligations to him.

Sir Fred’s position on his pension is not thought to have changed following the conversation with Sir Philip this week. Sir Philip said that he was disappointed by the vote but understood that feelings were running high about the pension, which had acted as a “lightning rod” for dissatisfied investors.

The meeting was remarkably divided. The management wanted to talk about returning RBS to “stand-alone strength” in three to five years and called for an “end to the public flogging” of the bank, but angry shareholders were determined to air their grievances.

Kenneth Barr, one investor, attacked Sir Fred Goodwin’s “cataclysmic failure” as chief executive. Another, Tony Peterson, said: “There is something Kafkaesque about this meeting. It looks like an AGM of a living bank but this is a dead bank on a life support machine funded by the taxpayer.”

One shareholder Harold McKeever drew laughter when he read out a piece of doggerel that suggested that “the Good Ship RBS has run aground on the Goodwin sands”.

Trying to close the meeting amicably, Sir Philip said that he was pleased to see that the spirit of William McGonagall, the notoriously bad bard from Dundee, lived on in Scotland.

Additional reporting by Kate Burgess

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