Prince Charles's office yesterday dismissed media speculation that his personal aide, Michael Fawcett, would be receiving a loyalty payoff of up to £1m after his resignation in the wake of the Peat report on staff practices at St James's Palace.
Claims about the size of the compensation were described as grossly exaggerated.
Mr Fawcett, 40, a royal servant for 20 years and once described by the prince as indispensable, was only mildly criticised in the report for a bullying manner towards other staff, but was cleared of more serious allegations of financial impropriety or receiving improper gifts or payments.
He will leave the royal service at the end of this month to set up his own company organising special events, a role similar to one of his duties working for Prince Charles. His first client will be the prince, who has guaranteed him a contract for what was described as a limited period.
On Thursday Mr Fawcett said he had been planning to leave the prince's service since before Christmas - just after allegations about him broke when the two royal butler trials collapsed. But he said he had waited until the internal review conducted by Sir Michael Peat, the prince's private secretary, was complete. "The prince's office has asked me to work for them in certain areas which, I am, of course, delighted to do," he said.
"This is an opportunity for me to broaden my career while at the same time retaining links with the Prince of Wales's household."
Although officials declined to give details of the size of the settlement reached with Mr Fawcett at Sir Michael's Thursday's briefing and yesterday, a spokeswoman insisted yesterday that he was only being given what was described as a termination payment, to help him find accommodation.
Media reports have assumed that Mr Fawcett, who is married with two children, will be allowed to keep the grace and favour house provided for him by the prince in Hampton, west London, but the palace refused to confirm this.
The speculation has been fuelled by the fact that Mr Fawcett was being paid around £100,000 a year by the prince and suggestions of a newspaper bidding war for his story. Under his existing terms of employment he will retain a duty of confidentiality even after leaving the household.
The palace spokeswoman said: "The single payment is specifically to help him with housing. It is not enough to buy a house.
"There is no other payment personal to him, although there will be a contractual engagement with his new company for a limited period ... It is an entirely private matter, but the sums quoted are wildly exaggerated."
The confidentiality contrasts with the report's detailed discussion of the payoff arrangements for Charles's former valet George Smith, who was dismissed in January 1997 after making allegations about being raped by a senior royal servant.
Mr Smith was paid £38,000, considerably more than his then salary and nearly three times what the prince's staff were advised he would get if he took his case to an employment tribunal and won. He was paid a lump sum of £30,000, part of which was to pay off debts and discharge £10,000 owed to the Priory rehabilitation unit in London, where he had been treated for alcoholism and depression.
Legal fees of £3,600 and £4,400 to help with housing "dependent on the availability ... of housing and other benefits" were also added to the overall figure.
Internal notes published in the Peat report show that the household was keen to pay him generously for fear of his story arousing bad publicity.
The report concluded the payment was reasonable and said: "The settlement is to be described as very generous. All concerned vigorously deny that its generosity was part of an improper scheme to 'gag' Mr Smith ... we are not persuaded that the amount agreed was so large and so far in excess of any 'norm' that it can only be explained as improper 'hush money'."