The pensions industry is pushing the government to create a state annuity system for underfunded private pensions as a quid pro quo for the announcement in the budget that the State will be taking on billions in liabilities from university and semi-state pensions.

The proposal is part of a package, presented to the government in November, aimed at supporting pensions in the private sector, up to 90% of which are underfunded and potentially unable to pay tens of billions in retirement obligations.

The Irish Association of Pension Funds (IAPF) and the Society of Actuaries have also asked government to change the rules on pensions to allow schemes to alter benefits, suspend covenants and relax the payment priorities.

The annuity scheme would involve the state buying pension liabilities at a 20% discount and investing them in sovereign bonds yielding more than German paper, thus making up some of the investment deficit.

Finance minster Brian Lenihan announced the government would be assuming €3bn in pension liabilities held by the universities and other semi-state bodies in exchange for €1.7bn of their assets to set against government debt.

The IAPF and the Irish Association of Investment Managers reacted angrily to the move.