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Co-operative Financial Services (CFS) and Britannia Building Society are to merge – forming a 'super mutual'.

The two mutuals maintain customers will continue to share profits from the proposed joint firm and will have a say in running the business – while the combined lender will save £60 million a year through efficiency savings.

Where two branches of the Co-op and Britannia exist in the same town, they will be merged – but the firms confirmed no compulsory redundancies will happen.

The Co-operative, Britannia and Smile brands will remain – but the joint firm will look to provide as single product range – raising fears it will reduce consumer choice.

CFS chief executive David Anderson said: "The co-operative and mutual movements have never been more relevant.

"Owing to the damage done by the credit crunch, people have been crying out for a new way of doing business with a financial organisation of substance that truly has their interests at heart

The merger of Lloyds TSB and Halifax Bank of Scotland, along with Santander's recent acquiring of Abbey, Alliance & Leicester and Bradford & Bingley – have all raised concerns choice over everyday financial products, such as current accounts, mortgages and loans, will be reduced.

Britannia members will have to approve the deal in a vote in April, which - if approved – will see them become members of the Co-operative Group.

“Britannia members have an historic opportunity to help create a new way of doing business in British financial services by voting to bring together two leading customer-owned businesses with unrivalled reputations for social responsibility, customer satisfaction, employee engagement and member democracy," said Britannia group chief executive Neville Richardson.

"They can choose to be part of something good.”

Full details will be sent to Britannia members in March.

The deal is also dependent on the passing of new legislation – set to become law in March.

The merged Co-op/Britannia firm will have £70 billion of assets, nine million customers, 300 branches and 12,000 employees.