AIB's board of directors will decide next week if the bank should accept the recommendations of an independent tribunal and set up a hybrid defined benefit/defined contribution scheme for staff based in the Republic.

Kevin Foley, chairman of an independent tribunal that considered the matter, yesterday recommended that a hybrid scheme - combining elements of both the defined benefit (DB) and defined contribution (DC) model - should be set up for workers here to give greater certainty to staff owhat they will earn on retirement.

The DB scheme would apply to all earnings up to €61,997, equivalent to the top of the pay range for an assistant manager with AIB. The value of the State pension would be integrated in to this calculation.

For earnings above that level, an "enhanced" DC scheme will apply. This would involve a contribution of 10 per cent from AIB for all pay above that level. In addition, staff would be required to make compulsory contributions of 5 per cent of their pensionable pay.

Mr Foley, director of the conciliation services division at the Labour Relations Commission, has also recommended that AIB should pay a 5 per cent "DC implementation top-up" for members of the existing DC scheme who opt in to the new pension arrangements. This is designed to compensate them for having been members of a DC scheme for the past decade.

The retirement age has been fixed at 65 and Mr Foley has suggested that there should be a fixed annual review for determining contribution levels for the bank and employees.

Mr Foley said these measures should be introduced on December 1st. If implemented, the proposals would affect staff in bank branches, group support functions and AIB Capital Markets. It is not expected to affect Goodbody Stockbrokers, an AIB subsidiary.

Larry Broderick, general secretary of the Irish Bank Officials' Association, welcomed the recommendations, which followed three years of negotiations between the two sides.

"I would be hopeful that the board of AIB would endorse these proposals," Mr Broderick said. "The company has a responsibility to put in place a good pension for its employees. The current scheme was never going to deliver for staff, something that, to be fair, senior management at AIB have recognised."

AIB declined to comment. The bank's board will meet on May 24th to consider the issue. The IBOA said its executive would meet the following day to discuss the matter before taking it to members.

AIB closed its DB scheme to staff in Ireland in December 1997, replacing it with a less lucrative defined contribution one for new workers.

At present, about 35 per cent of its 9,500 staff in Ireland are members of the DB scheme. The other 6,175 staff are members of a DC scheme, to which AIB makes a contribution of 8 per cent of an employee's pay. According to the IBOA, only about 70 per cent of these workers contribute towards their DC pensions.