The government’s plan to cut the tax break on pension savings was passed by the senate on Tuesday.

The cut, part of the government’s pension reforms, was agreed by the coalition parties and three ‘friendly’ opposition parties last December to ensure it had passed through the senate, where the coalition does not have a majority.

The plan centres on cutting the amount workers can save tax free towards a pension from 2.25% to 1.85% of their annual salary. 

The cabinet had wanted to reduce the tax break to 1.75% of salary but opposition parties said this would have a serious impact on pensioner spending power and make it impossible for young people to build up a proper pension.

The new tax break threshold is expected to save the government €3bn.