The addition of a surprise late restriction limiting the access of occupational pension holders to a key new independent pension product followed discussions between three Government departments, according to documentation released under the Freedom of Information Act. It has emerged also that the restriction would have been substantially greater but for the intervention of the Minister for Finance, Mr McCreevy.

The provision in the Pensions (Amendment) Bill 2001 prevents people who leave occupational schemes after 15 years' service from transferring their pension funds into the planned new Personal Retirement Savings Accounts (PRSAs). The restriction followed discussions between the Departments of Finance and Social, Community and Family Affairs and the Revenue.

But the time period could have been tightened to seven years had Mr McCreevy not insisted on it being longer.

It is understood the issue of people in defined benefit and defined contribution schemes being given a choice of moving into the new PRSAs, or the existing Approved Retirement Funds, is still under consideration. But no further changes can be included in the Pensions Bill which was passed in the Seanad on Thursday, coming into effect on June 1st.

Senior official sources said any change would come only after detailed consideration of all the complex issues involved and not through "the back-door" as part of the introduction of PRSAs. The policy position of the Departments is that people in good defined benefit schemes should stay in those and that PRSAs should not be seen as replacement for them. PRSAs were aimed at dealing with gaps in the market where people had no pension provisions and not at replacing existing schemes.

There was some concern among officials at the Departments that people in good occupational schemes could have been pressurised to move to PRSAs or ARFs just before retirement and could lose out through bad investment decisions or failure to manage their funds properly.

Any future increase in flexibility in the arrangements for defined benefit scheme members of more than 15 years' standing is expected to include a detailed set of rules covering any transfer of funds. As part of any such changes the Departments are likely to look for better annuity choices for defined scheme members - who must purchase at annuity on retirement to provide their pension income.

In response to a request under the Freedom of Information Act for details on how the unexpected 15-year restriction came about, the Department of Social Community and Family Affairs said: "The proposal came about on foot of discussions between this Department, the Department of Finance and the Revenue Commissioners."

The Department disclosed that it had received no submissions lobbying for the 15-year restrictions - market sources had suggested that some large funds could have sought the restriction to ensure they held on to most of the funds under their management.

The Bill will bring improvements for occupational scheme members, but it will not remove their so-called "annuity trap" disadvantage for occupational scheme members with more than 15 years' service compared with self-employed people and proprietary directors.

As low cost, easy-access, portable and flexible long-term personal accounts in which people can save for retirement, PRSAs will give the holders ownership of their funds and they will not have to buy an annuity on retirement to provide their pensions. But the pensions funds of employees in occupational schemes for 15 or more years must still be used on retirement to buy an annuity to provide their pension income. This requirement means the retiree has no control over the funds built up and that annuity income largely dies with the retiree leaving no assets to be passed to dependants.