The Government has yet to decide who will manage the funds it plans to set aside to meet future pension costs but competition is likely to be keen to oversee what will be the State's largest pension fund.

The leading candidate is the National Treasury Management Agency which has traditionally looked after the national debt but recently won additional powers to manage funds as well.

The Minister for Finance, Mr McCreevy, said he did not want to pre-empt the issue of who would manage the funds, an issue which the Government will consider when drawing up the legislation necessary to underpin the new fund.

But he admitted he saw advantages in the NTMA taking on the job.

"The NTMA has garnered expertise in managing the State's liabilities and they really are two sides of the same coin. I see many pluses in giving the job to the NTMA," he said.

There are a number of other outstanding issues that the Government will have to tackle in setting up the fund. Where the money can be invested will have to be considered carefully. By sheer virtue of its size, the fund could skew the investment industry, particularly given the small size of the Irish stock market.

The Government will also have to decide how the monies in the fund are treated in calculating the General Government Deficit, a key measure used by the European Central Bank (ECB) to determine the economy's health.