Public Pensions Study Shows Ability to Adapt to Pressure.

Position:News & Numbers

Public retirement systems produced solid returns, kept a lid on expenses, and adopted more conservative investment assumptions during 2017, according to a wide-ranging annual study by the National Conference on Public Employee Retirement Systems (NCPERS).

The 2017 NCPERS Public Retirement Systems Survey, released in January 2018, "reflects how pension trustees, managers, and administrators are constantly pursuing fiscal and operational improvements," said Hank Kim, executive director and chief counsel of NCPERS. "The nation's pension systems are deeply committed to their mission of providing a secure retirement for millions of firefighters, police officers, teachers, and other public sector workers," Kim said. "Over the seven years we have conducted this annual study, pension systems have grown increasingly confident in their ability to adapt to pressure and deliver on their promise to retired public servants."

Among the key findings:

* Public pension systems administered and managed funds at a lower cost than most mutual funds. The study found pension expense ratios averaged 55 basis points per dollar of investment. The 2017 Investment Company Fact Book pegs expense ratios at 63 basis points for equity mutual funds and 74 basis points for hybrid mutual funds. "Despite rhetoric extolling the advantages of defined contribution plans such as 401(k)s, the fact remains that pension funds consistently provide a higher level of benefits to members than most mutual funds do," Kim said.

* Aggregated one-year investment returns jumped to 7.8 percent, from 1.5 percent in 2016. Longer-range returns hovered at or near the assumed rate of return.

* The percentage of funds receiving their full, statutory contributions from governments rose to 74 percent, from 70 percent in 2016. In a related development, employer contributions rose to 22 percent, from 18 percent. "It is very encouraging to see more governments honoring their commitments to...

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