The chief investigator into suspected fraud at Anglo Irish Bank has rowed back on a decision to retire next month and join an exodus of public sector workers taking advantage of generous early-exit pension terms.

Paul Appleby, Ireland's director of corporate enforcement who has led the three-year probe into events preceding the scandal-hit bank's nationalisation, said earlier on Tuesday that he would leave his post at the end of February.

However, within hours, the government announced that Appleby -- who had said he would assist with the ongoing inquiry if required after his retirement -- would stay on for another six months until a successor was appointed.

I very much welcome it. The government is anxious to ensure that the very important inquiries continue in a seamless fashion, Minister for Public Expenditure Brendan Howlin told national broadcaster RTE, admitting he was surprised Appleby had given the government just one month's notice

Howlin said his department was working out the details of whether Appleby can still receive generous pension terms that run out next month. He said the department would come to a legally watertight accommodation to ensure all concerns are fully met.

Ireland has cut public sector wages by an average of 15 percent since 2008 but will link pension schemes to reduced salaries only from March, meaning retirees before then can enjoy packages based on pay levels enjoyed at the height of the country's Celtic Tiger economy.

With a hiring freeze in place since 2008, the government is set to make significant progress toward a target of cutting 37,500 staff by 2015, a reduction of almost 12 percent, through offering pensions based on pre-paycut salaries to those who leave by the end of February.

A spokesman for Howlin's department said 7,772 people had given the required four-week notice, due on Tuesday, to indicate they intend to retire next month.

With many so-called frontline employees in the health service, education and police set to leave, a senior obstetrician warned this month that the flight of midwives could put the lives of expectant mothers and newborns at risk.

Howlin has said 3,000 people could be taken on this year to fill any gaping holes in public services. He added on Tuesday that top officials like Appleby would be succeeded by people of equal competence and ability.

The delay in charging those responsible at Anglo Irish has frustrated Irish taxpayers who have pumped 63 billion euros (52.32 billion pounds) -- the equivalent of more than a third of the country's annual economic output -- into the banking sector to keep it afloat after a devastating property crash.

A lawyer for the country's director of public prosecutions said last week that charges in the Anglo Irish case may be brought within two months. However, Appleby's team was also granted a further six-month extension to continue its investigation.

(Reporting by Padraic Halpin; Editing by Greg Mahlich and John Wallace)