The Minister for Public Expenditure Brendan Howlin has described as "unacceptable" a severance payment made to top civil servant who retired during the Summer with a pension pot of €750,000.
Mr Howlin said payment to Dermot McCarthy was sanctioned by the Fianna Fáil/Green Party government.
The minister said he will shortly introduce major changes to public sector pensions to abolish "golden handshake" payments.
He also plans to lower the pensions bill in the public service, by basing pension payments on a civil servant's average salary over their entire career, rather than their final salary.
Addressing TDs at the Oireachtas Finance Committee, Minister Howlin also warned that the Government's comprehensive spending review, which will be published shortly, will indicate the tough decisions which are going to have to be made ahead of the budget.