The Massive Opportunity For Economic Growth Through Pension Fund Easing And Pension Reform.

Discussion in 'Economics' started by morganist, Feb 18, 2021.

  1. morganist

    morganist Guest

    This article was originally published at Morganist Economics at the link below.

    http://morganisteconomics.blogspot.com/2021/02/the-massive-opportunity-for-economic.html


    Copyright © 2021 Peter James Rhys Morgan.


    The Massive Opportunity For Economic Growth Through Pension Fund Easing And Pension Reform.



    By Peter Morgan.

    10:40 15/02/21.



    Economic growth offers an opportunity to avoid hard hitting economic policies that might be applied to deal with the increasingly high government debt. Instead of reducing government spending or increasing taxation to pay off the public sector debt, expanding economic growth would shrink the government debt as a percentage of GDP without damaging the economy. New methods of raising the economic growth rate could be introduced to 'Outgrow' the debt.

    Pension Fund Easing is the superior placement of pension fund assets to increase economic growth, it is a new technique that has not been applied yet but has the potential for future use. The objective is to maximise the quantity of transactions performed and the level of output produced within an economy over a set period of time. Certain types of investments generate transactions at a faster velocity or produce a higher level of output than other investments do.

    The selection of the superior financial products that enable the greater number of transactions or that create the highest rate of output is the goal of Pension Fund Easing. There are various methods of implementing an improved investment process which selects the optimal financial products for economic growth. The aim is to provide a superior investment strategy for assets held in pension funds, without consequences or restrictions being imposed on pension savers.

    Various methods of directing pension fund assets to the optimal investments which accelerate economic growth exist, although the most appropriate options have to be applied in practice. The tools used to direct investments include an investment requirement, taxation incentives, communication teams advising on the most suitable investments, expanding the investments permitted by pension schemes or the launch of new pension schemes and financial products.

    There is a massive opportunity to implement Pension Fund Easing, through reducing some of the restrictions that exist in the pension system. Pension Fund Easing places pension funds in specific products to reach the optimal level of economic output. This is currently limited as a result of the restrictions of how pension funds can invest their assets. Until 1989 all Private Pension Schemes (PPS) were insurance policies which have strong restrictions on investment.

    The Self Invested Personal Pension (SIPP) was introduced in 1989 by the Chancellor at the time Nigel Lawson. This new form of pension scheme sanctioned pension fund assets to be invested in a wider range of financial products, which is called having an open architecture. This enabled pension funds to invest in the best financial products without constraints, which expanded the ability to invest in financial products that increase economic growth the most.

    There are still numerous pension schemes that have a limited ability to invest the funds they manage in the top financial products for economic growth. This can be altered by introducing a more open architecture for a greater number of existing pension schemes or by launching a new range of pension schemes that are tailored to maximise economic growth. The other side of the improvement of pension fund investment is to make the appropriate products available.

    Providing a sufficient supply of financial products that meet the needs of pension schemes in the current economic environment and with the purpose of maximising economic output, is in itself an operation that needs to be performed. The ability to invest into the most appropriate financial products is only possible if there is sufficient quantity of the desired products in the market, an expansion of existing products or the development of new products is necessary.

    Over the last decade there has been a government led movement to increase the issuance of corporate bonds. The increase in issuances of corporate bonds was a reaction to the risk in the financial markets, brought about by the 'Global Financial Crisis' during 2007-2009. Corporate bonds are higher in the payout order in the corporate insolvency process, protecting the value of the assets. They also pay fixed rate returns, which protects against stock market instability.

    This move was desirable for pension annuity funds, which attempt to reduce the risk of low returns often caused by stock market crashes. The added protection the corporate insolvency process offers investors of corporate bonds was also an attractive incentive to place money in the corporate bond market. Governmental support to increase corporate bond issuances paid off over the last decade, seeing an increase in supply that paid higher returns than Treasuries.

    Opening up the investment opportunity for pension scheme funds or enlarging the size of the market of the currently existing optimal financial products that allow an economy to grow, is only one aspect of enabling Pension Fund Easing. The introduction of new pension schemes and products would allow the investment market to operate on a superior level, providing a new ability to direct pension scheme funding to the most effective financial products offered.

    Developing new financial products to invest in is another possible direction to maximise the effectiveness of Pension Fund Easing. If new financial products can be designed to increase the number of transactions or generate an elevated rate of output than the existing financial products, the ability to implement economic growth is enabled. By transferring pension fund investments into the new superior products a higher rate of economic growth can be reached.

    There is massive opportunity to maximise economic growth through authorising a more open architecture for the existing pension scheme funds. There is also large potential to make more of the financial products that are effective at increasing economic growth available to pension fund investors. However the best option to expand economic growth through the utilisation of Pension Fund Easing, is to develop a new range of pension schemes and investment products.