In 2016, public sector pension plans in the United States lowered the cost of administering funds and paying investment managers to 56 basis points, according to a new survey by the National Conference on Public Employee Retirement Systems.
That was down from 60 basis points in 2015 and is well below the average fee of 68 basis points for stock mutual funds and 77 basis points for hybrid mutual funds, according to the study. “By controlling fees, pension funds continue to demonstrate that they can provide a higher level of benefits to members than most mutual funds do,” said Hank Kim, the organization’s executive director and chief counsel, in a news release.
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The annual study, which draws on responses from 159 pension funds with more than 10 million active and retired members and assets exceeding $1.5 trillion, found average funding levels increased for the third year in a row. Levels reached 76.2 per cent in 2016, up from 74.1 per cent in 2015 and 71.5 per cent in 2014.
The pension funds surveyed experienced healthy three-year, five-year and 20-year returns in 2016 that were close to or exceeded eight per cent on average. One-year returns averaged 1.7 per cent. “All signs point toward continued improvement in increasing public retirement systems’ funded status,” said Kim.
Almost 40 per cent of pension funds that responded to the survey said they’d reduced their actuarial assumed rate of return, with almost 30 per cent saying they’re considering doing so in the future. More than 30 per cent of respondents said they have increased employee contributions and raised benefit age or service requirements.
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