M&G has a business that can grow, it can grow through its with profits “Prufund” which I think could do other things than back bulk purchase annuities. Gordon has discovered that the key that turns the lock for Prufund is the bulk annuity purchase “plus” that with-profits brings. I wonder if it mightn’t help insurers do rather well.
A bright side and a dark side of M&G
This is the bright side of M&G but there is a dark one too. Leaseholders in the UK find themselves paying exorbitant ground rent and service charges. This is one of the funds that they will end up paying too.
It is outrageous that it thinks that the Government’s plan to reduce ground rents to £250 from 2028 with it taken to £0 in 40 years time. If that is disproportionate, then what has M&G got to say to the 5m people who own leasehold property in Britain today
M&G: FTSE 100 giant hits out at Rayner’s ground rent cap as it suffers loss
Asset manager M&G has swung to a loss driven by the Labour government’s introduction of a cap on existing ground rents.
The FTSE 100 group hit out at the government after it reported a £165m loss for the first six months of the year, driven by a £325m write-down eating into its bottom-line. In its core operating profit, a measure which excludes the write-down, the group posted a 15 per cent increase to £435m.
Housing secretary Angela Rayner has been one of the key advocates for the £250 annual cap on pre-existing ground rents, which refers to annual fees paid by current leaseholders to a freeholder for the land beneath an older property.
M&G’s shareholder fund holds approximately £722m in UK ground rent assets, which generate long-term income streams to pay future customer pensions. The group was forced to recognise the write-down after the cap limited the cash flows the freeholds could collect, slashing the value of the assets.
Labour’s solution is ‘disproportionate’
Labour is targeting eventually phasing the cap down to £0. M&G said it had lobbied the government for a softer alternative, advocating for a cap tied to initial lease amounts with inflation-adjusted escalations as opposed to a blanket £250 cap that winds down.
“While M&G fully supports the Government’s objective… the proposed solution is disproportionate,”
the asset manager said at the beginning of the year.
It added:
“These changes, if implemented, would negatively impact savers and companies that have chosen to invest in UK assets; they would also set a worrying precedent, leading to consequences for the UK’s reputation as a stable investment location.”
There is a good and bad M&G and let’s hope that they will dispense with the bad one.
