LONDON (AP) — The Royal Bank of Scotland PLC said yesterday that its former chief executive Fred Goodwin has agreed to halve his annual pension after outrage at the size of the payout and threats by the government to take legal action.

The decision, which RBS said was voluntary, means that Goodwin — who was blamed for aggressively expanding the bank before the government was forced to step in to rescue it — will collect £342,500 ($555,470) each year.

He had been granted a £700,000 annual pension when he left RBS in October after the government bailout despite leading the bank to pile on debt, causing its near collapse, partial nationalisation and record losses.

Goodwin became a high profile target of public anger at excessive bonus payments for senior banking executives in the wake of the financial crisis.

He made a public apology for his role in the bank's downfall, but vandals attacked his home in Scotland, prompting police protection and Prime Minister Gordon Brown threatened legal action in an attempt to cut the pension.

Brown welcomed the deal agreed with Goodwin — who was knighted by Queen Elizabeth II for services to banking in 2004.

"I think for the future it is really important now that we have proper systems of bonus and reward that reflect not short-term deals but reflect long-term success," Brown told reporters in Brussels ahead of a meeting of EU leaders.

RBS Chairman Philip Hampton said that the pension deal had become a "symbolic issue, and the focus of unprecedented media and political attention."

"It had to be fixed to allow everyone to focus our energies where they should be, on getting the company back to health," Hampton said in a statement. "I am very pleased that we have resolved a situation that has been a difficult and unhappy one for all the parties involved, and it is to Fred's credit that he has done this on a voluntary basis."

Goodwin was blamed for pursuing a financially disastrous takeover of the Dutch Bank ABN Amro, which plunged RBS into a British record loss of £24.1 billion ($36.2 billion) in 2008.

The government now has a 70.3 percent stake in the bank, which it runs at arms length through a company set up specifically to oversee state investments taken in banks under the October industry bailout.

The Treasury office also came under fire for the pension when it emerged that a junior minister had approved it. The deal meant that Goodwin could access the pension when he recently turned 50, instead of waiting until he reached 60. Hampton said he had been in discussions with Goodwin about reducing the pension since he became chairman of RBS in February.

Goodwin wanted to wait until the conclusion of an internal inquiry into his pension arrangements, conduct, expenses and the use of company assets, he said. That internal inquiry concluded that there was no wrongdoing or other misconduct on Goodwin's part that would justify reducing the pension.

"Fred Goodwin was a respected CEO of RBS during its sustained growth over many years during his time in office," Hampton said. "He expressed his deep regret over the position RBS found itself in when the global crisis hit last year and fully accepted his share of responsibility as chief executive."