Northern Rock will cut 650 jobs and close its final salary pension scheme.
More than 2,000 jobs have already been lost at the bank since it was nationalised two years ago.
The job cuts are thought to be a way of reducing overheads and costs, making Northern Rock more attractive to prospective buyers, the Guardian has reported.
The closure of the bank’s final salary pension scheme means existing members will be switched to a money-purchase scheme.
But Unite union has criticised the move as “short-termist” and called for political intervention “to prevent this business being dramatically scaled back and prepared for sale”.
Union sources said the number of proposed job losses could reach nearly 1,000 if part-time and casual staff were included.
Rob MacGregor, Unite’s national officer, said: “The decision by Northern Rock to cut over 20% of its workforce and alter the pensions of the remaining staff is devastating. Such massive changes represent a total reappraisal of the service the bank provides to its customers.”
Gary Hoffman, Northern Rock’s chief executive, said: “There is still a challenging economic environment and in order to meet our objectives, we must align our staffing level to match the smaller size of the business, increase efficiency and reduce our cost base.
“We remain in public ownership and it is important that we continue to deliver value for taxpayers.”
The taxpayer currently has a £1.4bn stake in Northern Rock, which is viewed as the good part of the business, but the Treasury has lent the bank about £22bn, much of which will be paid off over the next 20 years as mortgages are redeemed by existing customers.