Public pension holdings, investments highest since '08: Census

WASHINGTON Thu Dec 20, 2012 11:16am EST

WASHINGTON (Reuters) - U.S. public pensions hit a financial milestone in the third quarter of 2012, with their total holdings and investments reaching the highest in more than four years, Census data released on Thursday showed.

A rising stock market helped push their holdings to $2.8 trillion, up 2.6 percent from the preceding quarter and 10 percent from the third quarter of 2011. That was the highest level since the second quarter of 2008.

According to the Census, corporate stocks rose 0.6 percent from the second quarter to $949.2 billion, which was also 23.4 percent higher than the $769 billion in the third quarter of 2011.

The Census tracks the 100 largest state and local government pension systems, which represent nearly 90 percent of public pension financial activity.

International securities also rose from the prior quarter, by 6.6 percent, to $540.9 billion, while corporate bonds dropped 1.9 percent to $351.3 billion and U.S. Treasuries fell 1.7 percent to $245.7 billion.

Public pensions are short $757 billion to pay for future benefits, according to Pew Center on the States.

Investments provide the lion's share of retirement system revenues, with employers and employees also pitching in funds. During the 2007-09 recession, the financial crisis caused those investments to crumble just as states confronting collapsing revenues cut their pension contributions and their staffs.

Pensions have slowly marched back to health since their holdings reached a low of $2.1 trillion in 2009.

In the third quarter, they earned $108 billion on their investments after losing $16 billion the quarter before and losing $199 billion in the third quarter of 2011.

Employees, meanwhile, put in $8 billion in the third quarter and governments - essentially taxpayers - contributed $19 billion. Both groups contributed less than in the second quarter.

Altogether, the retirement systems paid beneficiaries $54.6 billion in the third quarter, close to the record $55 billion in payments made in the first quarter. Demand for benefit payments will likely continue to rise in coming years as more members of the Baby Boom generation retire.

(Reporting By Lisa Lambert; Editing by Tim Dobbyn)