The Co-operative Bank’s pension scheme is to split from the Co-operative Group’s pension scheme as part of deal to raise capital for the Bank.

Investors have agreed a £700m deal, which involves them swapping their debt for a stake in the Bank. The Bank of England’s Prudential Regulation Authority has supported this.

In a statement published on the London Stock Exchange, 28 June, that Bank confirmed it has agreed the principles with Pace Trustees Limited, which looks after the scheme, to separate the respective sections of The Co-operative Pension Scheme (Pace).

The scheme will be split into two legally separate Bank and Group sections within Pace, with around 21 per cent of the assets and liabilities of Pace allocated to the Bank section, and with the removal of the Bank's obligation to support the pension liabilities of the Group section.

As part of this, the Bank has agreed a recovery plan for its section of the scheme, which involves contributing £100m over the next 10 years. For the first five years, £12.5m will be paid and in the six years thereafter £7.5m will be paid. The Bank will also provide initial collateral of £216m from the point of sectionalisation.

Despite the scheme’s separating, it noted that in certain circumstances there could be an obligation on the Group to support the pension liabilities. The separation of the scheme is conditional on implementation of the proposal by the bank to and clearance from The Pensions Regulator.

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