There was incredulity among MPs when it emerged last week that Mr Entwistle insisted on a full 12 months salary before quitting - even though he was contractually entitled to just half that amount.
In addition, he received £35,000 for legal expenses and £10,000 for public relations as well as 12 months private medical cover.
Lord Patten, who appeared before MPs alongside acting director general Tim Davie, justified the decision.
He described how he had told Mr Entwistle: "We are not urging you to go but we are not urging you to stay."
Mr Entwistle had wanted to leave through a "consensual termination of his contract", but had insisted on leaving the corporation "on 12 months or more", Lord Patten said.
But he said after discussions with lawyers it became clear to him that without doing a deal, the case could develop into one of constructive dismissal or unfair dismissal, ultimately costing even more.
He said: "£450,000 is one hell of a lot of money.
"The idea that I did not understand how politically difficult it would be suggests a degree of political innocence on my part which I have to tell you does not exist
"But the options I had were absolutely clear.
"We either had to deal with it quickly there and then, broadly speaking on the terms of 12 months, though that was less than we were asking for, or we had to go to constructive dismissal and constructive dismissal would have landed us with exactly the same amount of money, plus almost certainly another £80,000 of unfair dismissal."
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