Former Waterford Crystal workers will get a lump sum of €1,200 per year of pensionable service in the company, along with their “modest” pensions, Tanáiste Joan Burton said today.

She said the Revenue Commissioners had confirmed the lump sums would not be subject to capital taxation.

Speaking at Government Buildings, Ms Burton said the money would come from the State’s Central Fund.

The deal will cost the taxpayer €178 million over a “long period of years”, she said.

She said 1,774 individuals would benefit from the arrangement. The deal agreed today will see pensions ranging from €5,000 or €6,000 or less, while others would long service would earn more.

These former workers at the crystal glass manufacturer were left with almost nothing for their pension fund when both the company and its pension fund were wound up in 2009 - a so-called double insolvency.

The agreement was drawn up by Labour Relations Commission head Kieran Mulvey and approved by Cabinet this morning.

Waterford TD Ciara Conway said the families of the 36 members of the scheme who had died would benefit.

In 2010, a number of former workers at the company, backed by their trade union Unite, took legal action against the Minister for Social Protection.

The Commercial Court referred the matter to the European Court of Justice.

In a 2012 decision the Luxembourg-based European Court of Justice ruled the State was in serious breach of the EU insolvency directive - a key piece of EU legislation which protects employees in the event of employer insolvency.

In particular, the court ruled that Ireland had failed to implement article 8 of the directive, which states that countries are obliged to protect the interests of employees and former employees with respect to the protection of their pension entitlements, in the event that their employer becomes insolvent.