Bank of Ireland has agreed a deal with unions that the bank hopes will close a €1bn pension shortfall and provide a capital boost to the lender.
The deal, which has to be formally approved by staff, will mean a €400m accounting boost to the bank.
That gain is expected to help ease the way towards an expected capital raising as early as this year, when the bank is expected to tap investors for cash to help repay a share of €1.8bn of so-called preference shares used by the State to rescue the lender.
The pension deal is in relation to the Bank Staff Pensions Fund, the group's biggest pension scheme that has 80pc of all the bank's pension liabilities.
BoI said agreement to restructure the scheme has been agreed with the Irish Bank Officials Association (IBOA), the main staff union following talks at the Labour Relations Commission.
The new deal will see staff currently in the defined-benefit pension scheme retain their defined-benefit status, but with changes to potential future benefits in particular to future pension increases.
Under the complex deal, the increased pension entitlements for employees who are promoted or get a pay increase will be a mix of defined- benefit and defined-contribution entitlements.
No new staff have been able to enter the defined-benefit scheme since 2006, and a new defined-contribution scheme will be introduced for new joiners, probably next year.
"This recommendation ... ensures the continuation of the defined-benefit pension scheme for future accrual; protecting most of the benefits secured by IBOA in 2010; and putting in place a defined-contribution scheme for new starters which is a market leader," according to union General Secretary Larry Broderick.
Information packs are expected to be issued to all staff by the end of November, and the IBOA will ballot members on the plan.
Under the terms agreed the bank will continue to pay the residual due under a 2010 pension deal, when it committed to pay €750m into the scheme over five years.
"Dealing with the pension deficit is crucial from a capital perspective," said Emer Lang, an analyst at Davy Stockbrokers, ahead of the agreement.
That's because any gap in banks' pension schemes will be counted against them in terms of their regulatory capital requirements from 2019.