Bank of Ireland Chief Executive Richie Boucher has announced he has decided to waive his option to retire on pension at 55.

By waiving his right to retire early, Mr Boucher has removed the need to top up his pension by €1.5m.

In a statement, Mr Boucher said he remained 'sensitive to the current comment and debate about my pension arrangements.'

The move follows contacts throughout the day between the Taoiseach’s department and Bank of Ireland headquarters.

A spokesman for the Taoiseach welcomed the announcement, adding the decision reflected earlier comments from Brian Cowen about the controversial pension entitlement.

Earlier, Taoiseach Brian Cowen said it would be 'helpful in public perception terms' if Mr Boucher refused to accept the top-up.

However, Mr Cowen insisted there was nothing the Government could do legally to force this to happen. He said it was a matter for the trustees of the pension fund.

The Taoiseach’s comments disappointed The General Secretary of the Irish Bank Officials Association, Larry Broderick.

Mr Broderick said the Taoiseach should have been providing better leadership on the issue.

Prior to Mr Boucher’s statement, the General President of SIPTU, Jack O'Connor, said the top-up 'stinks to high heaven'.

Speaking after a meeting of the ICTU executive council, Mr O'Connor said the controversy had done more damage to the public's perception of the behaviour of those in authority than anything else since the financial crisis broke in September 2009.

He also said it would have a detrimental effect on the outcome of the ballot on the Croke Park pay agreement.

He said it directly contradicted the assertion that a line had been drawn under all that went on before the banking crisis.

Earlier, the Chief Executive of the Labour Relations Commission also criticised the pension top-up.

Kieran Mulvey said such awards were creating a negative climate in industrial relations and would make it harder to get the pay deal accepted by members.

He said these payments to top executives in banks were taking place against a background where people were being asked to take severe cuts in wages, pensions and employment.

Mr Mulvey said he had dealt with banking management and unions for years as an arbitrator, but said the current events were completely different.

He asked what the public interest directors appointed to the boards of banks were doing about such payments and why they had not been called before an Oireachtas Committee to account for these matters.

He said that union debate on the pay and reform agreement, which is currently under ballot, was being dominated by anger over revelations surrounding payments to key bankers.

The LRC chief said that anger could lead to the agreement being voted down.