REG - M&G PLC - M&G’s response to Leasehold Reform Bill

M&GAnnouncement

27/01/2026 08:15

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RNS Number : 5189Q  M&G PLC  27 January 2026

M&G's response to
Leasehold Reform Bill

This announcement contains inside information

M&G notes today's announcement by the Government regarding proposed
changes to ground rents in England and Wales.

Under the current proposal existing annual ground rents are expected to be
capped from 2028 at £250 for a transition period of 40 years, at the end of
which all ground rents would be reduced to zero.

M&G reconfirms the adjusted operating profit growth and capital generation
targets announced in March 2025, and our existing progressive dividend policy.

 

Summary of estimated financial impacts based on 30 June 2025 figures:

M&G is directly exposed to £722 million of ground rent assets through its
Prudential Assurance Company shareholder fund(1).

M&G's strong financial position and our ongoing prudent approach to
capital allocation mean we are well placed to absorb and manage this impact.
 Under the proposed changes, we would expect our Shareholder Solvency II
coverage ratio to reduce by c. 1 percentage point.

Should the proposed changes be approved in the current form, the write down in
valuation of M&G's relevant assets is expected to lead to a c. £230
million one-off reduction in the Group Solvency II Own Funds.  Before any
mitigating actions available to us, the impact on the Group Solvency II
surplus would be limited to a £140 million reduction, due to the release of
the Solvency Capital Requirement (SCR) allowance already made, and disclosed,
in our 2023 Annual Report.

Once the proposed changes take effect, likely in 2028, we would expect a c.
£15 million reduction in annual adjusted operating profit and underlying
capital generation, due to lower surplus assets in our annuity book.  This is
before any mitigating actions, such as balance sheet optimisation and greater
cost control, which we expect to take in the coming months.

The table below shows the estimated impact of the proposed legislation on key
financial metrics, before any mitigating actions, based on 30 June 2025
financial statements.  These initial estimates will be finalised and
discussed further at our 2025 FY Results presentation.

 Solvency II one-off impact  Own Funds                           c. £230m reduction
                             SCR                                 c. £90m reduction(2)
                             Surplus                             c. £140m reduction
                             Shareholder coverage ratio          c. 1 ppt decrease
                             Leverage ratio                      < 1 ppt increase
 IFRS one-off impact         Day 1 non-operating loss (pre-tax)  c. £(310)m

Wider implications
Ground rents have been a core component of the English and Welsh real estate market for centuries, with leaseholders providing a dependable income that freeholders rely on to manage properties and cover costs, including those relating to fire safety.
Over many decades, ground rents have become an important investment asset class, favoured by individual savers, charities, pension funds, and insurance companies, due to the long-term nature of their cashflows.

While M&G fully supports the Government's objective to strengthen
leaseholder protection and tackle remaining egregious ground rents, the
proposed solution is disproportionate, and we will continue to consider our
response.  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.

 

Andrea Rossi, Group Chief Executive Officer, said:

"M&G fully supports the Government's objective to strengthen leaseholder
protection and tackle  remaining egregious ground rents.  However, we are
disappointed that we have not been able to agree a proportionate solution that
works for all parties(3).

"The strong financial position of M&G and our thoughtful planning mean
that we are well positioned to absorb and manage the negative impacts
generated by this proposed legislation.

"Thanks to the quality of our business model and our disciplined approach to
capital management, we today reconfirm the adjusted operating profit growth
and capital generation targets announced in March 2025, and our existing
progressive dividend policy."

 

Notes to editors:

The person responsible for arranging the release of this announcement on
behalf of M&G plc is Charlotte Heiss, Group General Counsel & Company
Secretary

 

Enquiries:

 Media                                     Investors/Analysts
 Irene Chambers  +44(0)7825 696815         Luca Gagliardi      +44(0)20 8162 7301
                 Irene.Chambers@mandg.com                      Luca.Gagliardi@mandg.com
 Will Sherlock   +44(0)7786 836562         Simran Parmar       +44(0)20 8162 0956
                 Will.Sherlock@mandg.com                       Simran.Parmar@mandg.com

 

1. The With-Profits Fund exposure to Ground Rents is £324m but investment
risk is not borne by shareholders

2. Net of the release of the provision set up at FY 2023

3. M&G advocated an alternative solution, which has the widespread support
of the industry and would see ground rents capped at the amount levied at the
start of the lease, plus escalations of a maximum of RPI or 5% per annum.

Forward-looking statements:

This announcement (including any information incorporated by reference in this
announcement) contains statements about the Company that are or may be deemed
to be forward looking statements. Without limitation, any statements preceded
or followed by or that include the words "targets", "plans", "believes",
"expects", "aims", "intends", "will", "may", "anticipates", "estimates",
"projects" or words or terms of similar substance or the negative thereof, may
be forward looking statements. These forward-looking statements are not
guarantees of future performance. Such forward-looking statements involve
known and unknown risks and uncertainties that could significantly affect
expected results and are based on certain key assumptions. Many factors could
cause actual results to differ materially from those projected or implied in
any forward-looking statements. Due to such uncertainties and risks, readers
should not rely on such forward-looking statements, which speak only as of the
date of this announcement. The Company disclaims any obligation or
responsibility to update publicly or review any forward-looking or other
statements contained in this announcement, except as required by applicable
law.

 

 

 

 

 

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