Douglas Fletcher, CEO of Plymouth & South West Co-op, has poured cold water on speculation that the society had proposed a merger with The Co-operative Group to shore up a £17.4m deficit in its pension fund.

Plymouth & South West Co-op, which has 67 food stores in Devon and Cornwall, announced plans to merge two weeks ago, with members speculating that its pension deficit, though down from £20m in 2007, could be the reason.

However, speaking to The Grocer, Fletcher insisted the directors had decided to merge because in the long run the benefits offered by The Co-op Group were more than Plymouth & South West Co-op would be able to offer its staff, members and customers.

"When the directors looked at the goods and services, the innovations in the business and refurbs in existing stores and the dividend to stakeholders including members, employees and the community, we couldn't match The Co-op Group's financial capabilities," he said.

The pension deficit had been a secondary factor and merging would mean greater security for the scheme, he added.

Members said the timing of the merger had come as a surprise when the society was set to announce record profits next month and had taken a cautious approach to trialling The Co-op Group's The Co-operative brand. The trial started in March last year but the brand has only been used in three store refurbs.

Fletcher denied the society had been cautious. "Our actions confirmed that The Co-operative brand was very strong," he added. "There has been a significant turnaround for the brand in the past year."

By merging, he was not calling for one society, Fletcher said.

"Independent societies need to make up their own mind," he said. "They need to look at their level of goods, services and rewards to stakeholders. If they can match the rewards of The Co-op Group, they should remain independent. If they can't, they should consider a merger."