US public pensions end banner year with record assets-Census

WASHINGTON, March 27 Thu Mar 27, 2014 11:32am EDT

WASHINGTON, March 27 (Reuters) - U.S. public pensions enjoyed a banner year in 2013, as rising investment returns and increasing government contributions pushed their holdings to record highs, U.S. Census data showed on Thursday.

Public pensions ended the fourth quarter with $3.192 trillion in cash and security holdings, the highest level since the Census began collecting data in 1968. That was 4.2 percent more than in the third quarter and 12.5 percent more than in the same quarter of 2012.

In each quarter of 2013, pension assets hit new records due to a rising stock market, allowing retirement systems to close some of the funding holes caused by the financial crisis. Investment earnings provide the bulk of retirement systems' revenues and nearly two-thirds of their portfolios are allocated to equities.

The retirement systems' stock holdings reached $1.121 trillion in the fourth quarter, 5.9 percent higher than the previous quarter and 18.1 percent more than in the final quarter of 2012, Census data shows.

Likewise, international securities hit $665.9 billion, a 4.4 percent rise from the third quarter and a 14.2 percent increase from the fourth quarter of 2012.

Meanwhile, corporate bonds were $337 billion and Treasuries were $267 billion in the fourth quarter, according to the Census report.

The financial performance has been stronger than anticipated and over the last two years, pensions' earnings have outstripped projections. Earnings in the fourth quarter, $165.71 billion, were the highest since $170.73 billion in the first quarter of 2012. They were also three times the $62.09 billion earned a year earlier.

For years, many states short-changed their public pensions, putting in far less than actuaries suggested, and then cut further during the 2007-09 recession when their revenues crumbled. At the same time, the financial crisis ravaged pension investments.

From coast to coast, battles have erupted over whether states have enough money to pay promised benefits, especially now that the first wave of the Baby Boom population is retiring. While the investment windfall has helped, some retirement systems still face large funding gaps.

The Census data showed governments are now putting more money into retirement systems, with their total contributions reaching a record $27.58 billion in the final quarter. Government contributions, essentially the taxpayer tab, were 23.9 percent more than in the third quarter and 4.4 percent more than the fourth quarter of 2012.

Employee contributions have remained steady, even though the public workforce suffered dramatic layoffs and cuts over the last half decade. They reached $10.36 billion in the fourth quarter, the most since the middle of 2012. That was 25.5 percent more than the previous quarter, but only 0.8 percent higher than the same period the year before.

Meanwhile, payments to retirees rose, but were below the peak they hit earlier in 2013. From the third quarter they increased 0.6 percent to $59.3 billion. That was 5.9 percent more than a year earlier.

(Editing by Bernadette Baum)