The Government could reduce the pensions paid to former banking executives by up to 40 per cent without facing legal or constitutional difficulties, Fianna Fáil has claimed.

The party published legislation yesterday that it says would allow the “exorbitant” pensions paid to former staff of State-covered banks to be significantly reduced.

Fianna Fáil finance spokesman Michael McGrath TD said the legislation was based on the 20 per cent cut secured on the pensions above €100,000 paid to retired public servants.

The proposal was “deliverable” and legal advice suggested it would withstand a constitutional challenge, he said. He believed this meant the Government could not object “in any reasonable way” to it.

Under the legislation, pensions of €100,000-€150,000 would fall by 20 per cent. Pensions of €150,000-€200,000 would be cut by 30 per cent, and amounts over that would drop by 40 per cent.

“We’ll be asking the Government now to back up their words of outrage and condemnation we have heard in recent weeks and actually enact this piece of legislation as quickly as possible,” Mr McGrath said.

Members of the public, he said, were “horrified” to learn of some pension payments and would be expected to take further cuts to their standards of living in next month’s budget.

Earlier this month, Minister for Finance Michael Noonan said he was powerless to rein in the pay and pensions of senior bankers, which Taoiseach Enda Kenny told the Dáil were “utterly exorbitant” and “extraordinary”.

Mr Kenny said banks had a “moral responsibility” to reduce retirement payments. Since then, former AIB chief executive Eugene Sheehy has agreed to take a cut in his annual pension to €250,000.

It was recently reported that AIB had used some of the €1.1 billion it got from the State to fund pension payments. Mr McGrath said he was seeking to establish if there had been pension bailouts in other covered institutions. Asked if Fianna Fáil was trying to cover for decisions it made in government by introducing the legislation, Mr McGrath said this was not the case. Arrangements in many cases were between the banks and executives, and predated State intervention, he said.