No windfalls will be paid in the “supermutual” merger of Britannia Building Society and Co-operative Financial Services announced this week, but members will continue to receive annual cash rewards worth more than £100 in some cases.

The tie-up between the UK’s second-largest society and the banking business of the Co-operative, which includes Smile, its online arm, aims to offer an “ethical alternative” to shareholder and government-owned banks. Both lenders are customer-owned and the combined group will have 300 branches and 9m accountholders and borrowers.

Neville Richardson, chief executive of Britannia and head of the proposed group, said that while customers would not receive windfalls, they would retain membership of a mutual and continue to share in profits. “At a time when capital is important, it would not be a good use to distribute it to members,” he said.

Britannia’s reward scheme, which gives savers and borrowers an annual share of profits, will be replaced by the Co-op’s dividend scheme. This also allows members to earn “divvy” payments through purchases from other Co-op businesses, such as supermarkets and travel agencies.

Technically, Britannia will become part of the Co-op, and Britannia members will be asked to vote on the deal, which is due to complete in the summer. There will be no immediate change to savings and mortgage products or existing brands.

New legislation, due to become law in March, that aims to allow mergers between different types of mutuals, could prompt further tie-ups.