The Government is to cut pensions to ex-ministers who are still sitting Oireachtas members by 25 per cent.
Taoiseach Brian Cowen was forced to reduce the entitlements after a number of sitting Dáil members, including Fianna Fáil TDs, refused to take a cut.
The Government will abolish the payments entirely for TDs after the next general election.
Officials said the Government received legal advice from the Attorney General that a 25 per cent cut in the payments was the maximum that could be imposed.
Those affected were consulted and asked for suggestions on a suitable reduction, Minister for Finance Brian Lenihan revealed tonight, after a Cabinet meeting.
"That process was completed last week and I would like to thank deputies for their cooperation and for the large measure of agreement the proposal received from all sides of the House," he said.
Legislation to implement the cuts is expected to be passed before the summer recess.
Currently, former ministers serving as TDs, Senators or MEPs are entitled to half of the pension they would get from the age of 50.
The 25 per cent cut will apply to the actual payments rather than the full value of the pension.
A 10 per cent cut in Oireachtas expenses and a 25 per cent reduction in travel and subsistence allowances for members has also been announced.
Officials from the Department of Finance are understood to have spent yesterday working on a final draft of the proposal which was agreed at a Cabinet meeting this evening.
It comes after all but four of the 28 former ministers replied to a letter from Mr Lenihan setting out proposals to end the scheme and inviting submissions. It is understood that three who did not respond were from Fianna Fáil.
However, the department declined to identify the four politicians in question.
The largest pension, believed to be in the region of €116,000, is paid to former taoiseach Bertie Ahern. Others who are entitled to large pensions include Mary O’Rourke (FF), €53,622; Ruairí Quinn (Labour), €44,171; and Michael Woods (FF), €35,355.
In addition to TDs and Senators, five MEPs are entitled to ministerial pensions. A further three former junior ministers – Tom Kitt, Michael Ahern and John Browne — who were dropped by Brian Cowen when he became Taoiseach in May 2008 have received severance payments but have yet to be paid ministerial pensions.
Mr Lenihan announced in the supplementary budget in April that the arrangement would be discontinued.
However, it quickly became clear that there were legal difficulties – based on the principle of legitimate expectations – with ending the entitlement during the current Dáil.