The Co-op Bank is running a big risk by hitting pensioners

 
Tim Wallace
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THE CO-OP Bank’s reputation is on the line, and not just for financial stability – its hard-earned name as the all-round good egg of banking is at risk.

The reason is the make up of its investor base. The mutually-owned bank has long attracted loyal, elderly customers, and the bonds involved in the bail-in rescue deal were a great deal for pensioners.

Perpetual bonds paying 9.25 per cent or more give a healthy annual payout, akin to an annuity.

Big-time investors might seem to have had decent returns on the bonds over the last 20 or so years, but the picture is different for pensioners who rely on the income.

The bank has tried to solve the problem by offering affected investors independent financial advice. But campaigners have already claimed it is unworkable, as thousands will be affected, often with only small amounts invested – the advice may often cost more than the bail-in saves.

Loyal, vulnerable and aggrieved investors will not make the coming months comfortable for the bank.