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Flagship housing reforms previously spearheaded by Angela Rayner risk inflicting “needless damage” on Britain’s reputation as a “safe” place for investment, a pension insurer has said. The Labour Government’s Leasehold Reform Bill has been criticised by pension funds, housing groups and City firms in written submissions published by the Housing, Communities and Local Government Committee (HCLG).

The legislation includes plans to impose a £250 annual cap on ground rents across England and Wales in a major shake-up the Government insists will give five million leaseholders and future homeowners greater protections. But groups including pension insurer, Rothesay, and Nationwide Building Society‘s £7billion pension fund warn such action would damage the UK’s investment appeal.

Rothesay, which is responsible for the pensions of almost one million UK pensioners, said in its submission that it supports “proportionate reform” to the leasehold sector.

It added: “But the Ground Rent Measures do not represent proportionate reform and are extremely poorly targeted, given the Government’s aim to alleviate unaffordability.

“This comes at considerable cost to freeholders and investors and does needless damage to the reputation of the UK as a safe jurisdiction for investment where the Rule of Law will be upheld.”

The pension insurer added: “The Ground Rent Measures are also remarkably intrusive: they retrospectively change the terms of legally advised contracts in a manner which fundamentally changes the deal agreed between willing parties, calling into question the UK’s commitment to international and human rights law”.

Nationwide Pension Fund said the £250 cap “sends a very damaging message that the UK is not a safe or attractive investment landscape”.

It added that the draft Bill “conflicts” with the Government’s commitment to economic growth and its bid to portray the UK as being “open for business”.

The fund said: “The draft Bill and policy approach of taking away the rights of investors on assets and investments that were agreed upon in legal contracts erodes investor confidence that the UK is a safe place to invest.

“Such action damages the international reputation and appeal of the UK as a place of investment”.

Nationwide Pension Fund also pointed to the Government seeking pension funds’ support for investment in UK businesses and other asset classes, with the aim of boosting growth in the economy and increasing returns on pension investments for members.

It said: “The Bill sends a negative signal to those same pension funds, that those investment rights made on behalf of individual savers are not safe nor guaranteed”.

Non-profit, TheCityUK, said in its submission that its members and other firms which have invested in ground rents as an asset class had “serious concerns” about the draft legislation.

These include the threat of retrospective changes that could devalue an established asset class and the risk of “denting” investor confidence in the UK.

The group warns the proposals in the draft Bill would effectively mandate a transfer of value of between £10billion and £12.7bn from freeholders to leaseholders.

It added: “However, because 41% of residential property leases are held by private landlords rather than owner-occupiers (more for flats, more in London) almost half of this value will go as a windfall to private landlords rather than owner-occupiers.”

The £250 ground rent cap, which would become a peppercorn rent after 40 years, is described by TheCityUK as appearing “arbitrary”, “regressive” and based on “policy confusion”.

In its submission, The National Trust said it “broadly” agreed the £250 cap would help ensure leaseholders do not face “unaffordable” ground rent charges.