Update: Prime minister Gordon Brown has waded into the row over former RBS chief Sir Fred Goodwin’s £650,000 a year pension, arguing no one should be rewarded so much money at a time when the bank itself is making record losses.

It comes as Sir Fred reportedly said he would 'think about' giving up his pension entitlement.

Hinting that legal action may be taken, and with reports that the Treasury is in talks about clawing back some of the pension, the PM said such a payout could not be supported.

'In the end this is a legal action matter, but no one can support such very extensive pensions arrangements at a time when banks are losing jobs and money,' he said.

The government is now in talks with the chairman of Royal Bank of Scotland to see if some of the payout can be clawed back.

The Treasury has already asked Sir Fred to forego some of his £650,000 a year pension after a furore broke out regarding the scale of the payout following the effective nationalisation of his former bank.

Having emerged last night that Sir Fred was to be paid the sum every year for life, chancellor Alistair Darling said earlier today that the ex-boss of RBS had been asked by the secretary to the Treasury, Paul Myners, to cut the payout.

Darling said that 'you can't justify these excesses... when you have a failure of this magnitude' adding the Treasury was 'looking into what could be done', following a public outcry about the pension payout.