The average funding ratio for U.S. public pension plans increased to 77.8 per cent in 2022 with the majority (68 per cent) of pensions’ revenue coming from investment returns, according to a new survey by the National Conference on Public Employee Retirement Systems.

The 12th annual public retirement systems study received responses from 195 state and local government pension funds, which represent more than 19.6 million active and retired members with combined assets exceeding $3 trillion.

Across these pension funds, the average one-year return was 11.4 per cent. And among the various asset classes in which they invest, real estate and private equity saw the largest returns last year.

Read: Funding status down, alternative investments up among DB pension plans: survey

“The study’s findings highlight public pensions’ resiliency in the face of volatile markets, rising interest rates and disruption in the workforce during the COVID-19 pandemic,” said Hank Kim, the organization’s executive director and counsel, in a press release. “It’s clear that public pensions remain dedicated to maximizing returns while managing risks in order to efficiently deliver retirement benefits to public servants all over the country.”

When the pension plan sponsors were asked how satisfied they are with their readiness to address retirement trends and issues over the next two years, the average rating was 7.8 on a scale of 10, down slightly from the previous year.

In addition, the survey found the average assumed rate of return was 6.86 per cent. While investment returns were the most significant source of pension fund revenue by far, the average member and employer contributions each rose by one percentage point to nine per cent and 24 per cent, respectively.

And more than half (54 per cent) of pension funds said environmental, social, and governance factors are somewhat or very important in their investment decisions.

Read: Survey finds fewer U.S. institutional investors incorporating ESG into investment decisions