Outgoing PSA chief executive Philippe Varin reportedly has given up pension benefits worth EUR21m, after criticism from union leaders and senior government ministers over the size of the payout.

The payout to the top executive, who will be replaced by former Renault COO Carlos Tavares some time in 2014, was seen as inappropriate for an automaker axing thousands of blue collar jobs and closing plants.

According to the Financial Times, Varin, chief executive since 2009, said he would abandon his pension rights, adding that the circumstances in which he was granted them in 2010 were “very different from today”.

This year, PSA’s European sales have fallen 10% year on year, far more than the overall market.

On Varin’s watch, Peugeot has planned to eliminate 11,200 jobs and freeze wages in a bid to stem its losses and reduce overcapacity. Last year, he oversaw the closure of the first large factory in France for 30 years.

The CGT union drew attention to his pension entitlement on its website, linking to a 2012 Peugeot Registration Document highlighting a pot of just under EUR21m, the FT said.

Jean-Pierre Mercier, head of the CGT union at Peugeot’s Aulnay factory, denounced the pension package as a “scandal” and “shocking” – and called on Varin not to take the money.

Varin had initially suggested the controversy was based on “misconceptions”, saying the EUR21m provision would amount to EUR310,000 a year after taxes and social security, and would not come as a lump sum.

However, on Wednesday, he bowed to pressure, saying: “Given the immense respect I have for our company’s staff and the consequences of the difficult but necessary decisions I had to take, I have decided to renounce on the current dispositions of my pension package.”

He added the company’s supervisory board would decide on what would be the “appropriate” conditions of his departure, the FT said.