Industry News

On February 2, 2022, the National Conference of Public Employee Retirement Systems (NCPERS) released the results of its 2021 NCPERS Public Retirement Systems Study. The annual comprehensive survey provides information on investment experience, actuarial assumptions, plan administration and operations, trends, innovations and best practices. 

The key findings include: 

• Due to the COVID-19 pandemic, about 78% of pension systems offered live webinars to members in 2021 up from 54% in 2020.
• During 2021, the average funding levels (the value of the assets in the pension plan divided by an actuarial measure of the pension obligation) rose slightly. Average funding levels increased to 72.3% in 2021 from 71.7% in 2020. 
• Of the reporting pension systems, investment returns were the most significant source of revenue at 68% of overall pension revenues while employer contributions totaled 23% and employee contributions totaled 8%.
• In 2021, the average investment return assumption was 7.07% compared to 7.26% in 2020. The majority of responding funds reported that they have reduced their actuarial assumed rate of return or are considering doing so in the future.  
• The inflation assumption remained steady at 2.7%. These assumptions were in place during the acceleration in the rate of inflation that increased to 7% at the end of 2021, up from 1.4% in 2020 (as reported by the Bureau of Labor Statistics).
• Overall, the reporting funds experienced solid returns. On average, 20-year returns were 6.7%, 10-year returns were 8.4%, 5-year returns were 8.7%, and 1-year returns were 14.0%. 
• Of those reporting funds that offered a cost-of-living adjustment (COLA) for members, the average was 1.7% in 2021. However, many of the reporting funds did not offer a COLA in 2021.
• Pension funds decreased the cost of administering funds and paying investment managers to 54 basis points (or 54 cents per $100 invested) versus 60 basis points in 2020. This is comparable to the average fee of 59 basis points for hybrid funds.  

The survey included 156 state and local government pension funds with more than 17.7 million active and retired members and total assets exceeding $2.6 trillion in actuarial and market value.  Of the pension funds surveyed, 53% were local government funds and 47% were state pension funds. 

The report is available here.