A controversial tax imposed on people's pensions to finance the Government's jobs initiative has not been fully spent.

The development has been disclosed in a parliamentary question to Fianna Fáil Finance Spokesman Michael McGrath.

"The Government established a 0.6% levy. All of those affected were assured it would be used for the jobs initiative. Now it transpires the money has been diverted to deficit reduction," Mr McGrath said.

Government sources indicate that between €200m and €240m will not be spent out of a total fund of €1.88 billion.

The money was raised from a levy on pension funds over a four-year period.

Most of the underspend has been caused because Minister for Transport Leo Varadkar did not scrap the €3 air travel tax.

He proposed dropping the tax if airlines, mainly Aer Lingus and Ryanair, established new routes or increased frequency to boost tourism figures as part of the initiative.

However, proposals from the airlines were not deemed satisfactory by Mr Varadkar. As a result, the tax remains in place.

A spokesman for Mr Varadkar said the issue of spending money raised by the pension levy was the responsibility of the Department of Finance.

A spokesman for the Department of Finance said the scheme had been a success and not all of the pension levy had been collected. The department had yet to decide how the rest of it would be spent, he said.