One of the very few certainties about the year ahead is that pensions are likely to figure prominently. The report of the National Pensions Review, which sits on the minister's desk, promises the most dramatic shake-up of pensions policy in a generation.

Séamus Brennan this year bucked a trend that bedevils the pensions industry - putting off until tomorrow what should be done today - by bringing forward by a year a review of national pension policy.

That decision was confirmation, if any were needed, of the failure of the Government's most recent initiative to encourage private pensions savings - the Personal Retirement Savings Account (PRSAs) - to deliver results.

The State is looking to increase the proportion of the population over 30 holding some form of private pension savings from around 50 per cent to 70 per cent.

Despite its best efforts, the figures remains stubbornly close to that 50 per cent mark. Nearly two years after they were presented as the flexible, low cost way to start a pension, PRSAs have managed to attract fewer than 60,000 customers.

Almost as significantly, even those people who have started saving for a pension are putting nowhere near enough into those savings to produce the sort of income they will expect in retirement.

The pensions review seeks to address a number of the issues contributing to the difficulty in persuading people to plan adequately for their years after work. These include problems with persuading people of the value of the tax relief available on pension contributions and worries about locking up money in savings that might be needed in the shorter term for financial emergencies.

The review proposes offering tax relief at the higher 42 per cent rate of income tax to all people for pension savings, even if they only pay tax at the lower 20 per cent band.

On PRSAs, in particular, it goes further. In an effort to kick-start meaningful sales of the product, it suggests adopting the "matching contributions" formula that proved so successful with Special Savings Incentive Accounts (SSIAs) - in this case offering €1 from the Government for every €4 invested by the individual.

The problem for the Government is how to make a system that is already a significant financial burden on the State more user-friendly without increasing the burden on limited exchequer resources.

The Minister for Finance made some initial moves in his recent Budget, placing a cap on the amount of the size of pension funds attracting relief in a package that is expected to yield €42 million a year in savings.

The Government is likely to agree further measures that will appear in the Social Welfare Bill early next year.

The challenge facing Mr Brennan and Mr Cowen is to offer incentives that are strong enough to persuade people of the good sense of pension savings without placing an unnecessary burden on the State financially. One possibility is to scrap the PRSI relief for employers on pension contributions.

Ultimately, the existing pension system does offer generous relief but it is disproportionately tilted towards higher earners, who don't need incentives.

The people the Government is looking to persuade of the virtues of pension savings lie elsewhere and wooing them will rely much on being offered a clear, easily understood method of saving, possibly with the prospect of some emergency access to at least part of their funds before retirement.

For those who already have pension savings, the performance in 2005 has been strong. The average Irish managed pension fund grew 17.3 per cent in the first 11 months of the year.

If pundits are to be believed, pension savings are likely to continue to grow over the next couple of years at least.