Negotiations are due to resume this morning, having been abandoned last Tuesday evening after employers and unions failed to agree on pay and the protection of employment standards.

But it is understood that pensions are another major barrier to agreement, with officials at the Department of Finance concerned that the Exchequer could be exposed to huge liabilities if the state were to play a bigger role in relation to workers' pensions.

The issue has gathered new momentum following Bank of Ireland's announcement on Wednesday that it plans to shut its main pension scheme to new recruits, a move branded "fiscally reckless and morally reprehensible" by the Irish Bank Officials Association.

Documents prepared for union negotiators in the national pay talks, seen by the Sunday Tribune, strongly support the establishment of a State Annuity Fund. The idea is that the state should play a much greater role in helping workers get a better deal on their pension savings when thy retire.

The Department of Finance strongly opposes the idea, believing that it could expose the Exchequer to huge liabilities down the line and breach EU competition law.

For many workers, the only option at present is to use their pension nest egg to buy an annuity from an insurance company when they retire.

The annuity provides a guaranteed income for life but offers very poor value for money.

For example, a man retiring at age 65 would only get an income of 12,000 a year in return for a pension nest egg of 150,000. If the same man had retired a decade earlier, his savings would have bought a pension worth more than 18,000 a year.

A State Annuity Fund, first proposed in January in a high-level investigation for social affairs minister Seamus Brennan, would seek to use its buying power to set a better deal for pensioners by operating on a not-for-profit basis.

According to the union document, the state needs to do a lot more to help workers in the private sector in view of the huge expense of providing inflation-proofed pensions to public servants.

"More and more, the gap between public service pensions and private-sector pension provision is widening, " it states. "In truth, this gap is probably untenable already, though this may not be recognised until the pain of those retiring from the private sector over the next 10 years is fully felt. State support for public-service pensions will be unsustainable unless these supports are in some way also delivered to the private sector."

Senior civil servants are worried that the Exchequer would be left to foot the bill if a State Annuity Fund got the figures wrong by underestimating life expectancy or failing to earn an adequate return to meet the cost of providing the annuities.

According to sources familiar with the issue, it is by no means certain that the state could do a better job than private insurance companies in providing workers' retirement annuities.

"A state fund could only be justified if it could undercut the insurance companies and, to do this, you're probably talking about some sort of subsidy from the Exchequer, " said one source.