It is believed that hundreds of pensioners and other small investors in the Co-operative Bank in the UK are likely to lose losing millions of pounds under the new rescue plan for the financial institution.

The bank needs £1 billion to fill the gap in its finances and the management is also considering cutting or cancelling income paid to the bond holders of the bank. The decision would impact about 5,000 small investors who have bonds or permanent interest bearing shares (PIBS) in the bank. The bank had issued bonds to raise funds to acquire the Britannia Building Society in 2009.

PIBS holders have already seen the value of their investment fall and not the interest is likely to be cut. These bonds offers an annual interest of between 5.55 per cent and 13 per cent but the bank is expected to reduce this return rate significantly to improve its financial position. Many experts now believe that the takeover of Britannia is the main reason for the issued being faced by the bank.

New chief executive Euan Sutherland has taken charge at a time when the bank has multi-billion pounds in risky home loans and commercial property loan write-offs. The bank's whole mortgage book, which is about 6 per cent of its lending, is classified as impaired.