City and county councillors who are not re-elected next June will be paid tax-free lump sums of up to €70,416 each out of a €10m goodbye fund set aside to compensate them.

All non-returned councillors aged 50 and over will automatically qualify for immediate payment, whether or not they have stood for re-election.

They will be entitled to €3,300 a year for each year that they have served since 2000 and a lower amount for years before that.

Councillors who have served since the 1999 local election will get about €30,000, while representatives with 20 years' service or more will qualify for the maximum payment of over €70,000.

Individual payments to councillors with 20 years' service exceed the retirement lump sums payable to local authority public servants without a requirement to make any pension contributions whatsoever, even though local representation is not regarded as paid employment.

News of the fund should provide some comfort to embattled Fianna Fáil politicians who are encountering voters' anger on the doorstep over the state of the economy.

The €10m compensation chest could fund the state's abandoned plan to immunise teenage girls against cervical cancer, possibly twice-over.

It equals the cost of subsidies for elderly people to secure their homes against burglary, which was abolished by the minister for finance in this month's budget.

Details of the councillors' golden handshake fund will revive accusations that politicians continue to enjoy a gravy train while the country sinks deeper into recession.

Last week, it emerged that the government has reneged on its budget promise to terminate TDs' long-service increments and that it was back-pedalling on its promise to cancel the payment of ministerial pensions to serving Dáil members.

Changes made to the retirement gratuity scheme for councillors since the last local elections allow for bigger individual payments.

City and county members with 20 years' service qualify for four times their €17,604 annual representational payment, compared to a multiple of three at the time of the 2002 elections.

Councillors receiving the payment can still run for election in the future but must have served for two years to be entitled to parachute money.

The amendments made in 2006 by then minister for the environment, heritage and local government, Dick Roche, also lowered the minimum qualifying period for the lump sum payment from three years' service to two years' service.

There are nearly 900 locally-elected politicians on urban and city councils. They receive golden handshakes on a sliding scale of seniority.

It is not thought there are many councillors who have over 20 years' service. One source said: "There wouldn't be many qualifying for the maximum payment, no more than 10% of the city and county councillors. There was a 'scrappage scheme' in 1999 that cleared out a lot of longer-serving people and there's a turnover of about 30% or 40% at election time. In order to reach the 20 years' service requirement, you'd have to have been elected in 1985."

Explaining the changes in Seanad Eireann in July 2006, former junior minister in the Department of Finance, Noel Ahern, said: "In pure benefit terms, the councillors' retirement gratuity compares very favourably with retirement pension and lump sum payments. Using standard public service pension capitalisation rates, the gratuity paid to a councillor after 20 years' service is equivalent to the retirement pension and lump sum payable to an employee under the local government superannuation scheme after 20 years' service. Councillors do not have to make any contribution towards the gratuity, whereas there is a contribution of 6.5% for others."

He added that the tax exemption rules applicable to severance payments "means that very few, if any, councillors, will be liable to pay income tax on the gratuity".

Many councillors' lump sum payments will be double the average industrial wage but fall just short of the €75,000 benchmark for the 4% levy.

In addition to their €17,604 representational allowance, councillors claim expenses.