Amid Inflation and Market Volatility, Public Pensions Show Long‑Term Strength, NCPERS Study Finds
Media Contact: Lizzy Lees (llees@ncpers.org)
WASHINGTON — April 2, 2026 — NCPERS today announced the release of its 2026 Public Retirement Systems Study, offering a data-driven snapshot of how public pension systems are navigating market volatility, elevated inflation, and new technologies — while continuing to deliver secure retirement benefits to millions of public servants.
“As long-term investors, public pensions are built for exactly these moments,” said Hank Kim, CEO of NCPERS. “This year’s study shows systems staying focused on disciplined funding policies, diversified asset allocation, and operational efficiencies — even as markets and inflation remain unpredictable.”
Conducted annually since 2011, NCPERS Public Retirement Systems Study serves as a key resource for the public pension community to evaluate trends and compare fiscal, operational, and business practices. This 2026 edition received 149 responses from systems that collectively serve approximately 18.1 million members and manage assets ranging from less than $100 million to more than $500 billion.
Asset Allocation Shifts Reflect Risk Management in a Volatile, Inflationary Environment
Amid continued market volatility and an extended period of elevated inflation, public pension systems are adjusting portfolio strategies to balance risk and return objectives.
The data indicates a broad trend toward modestly lower equity allocations and increased allocations to fixed income, as systems recalibrate portfolios following sharp market swings, rising interest rates, and changing capital market assumptions.
This measured approach has helped support strong performance over longer horizons. Systems with fiscal year-end dates in the first half of 2025 reported:
- Average 1-year investment returns of 10.2% (net of fees)
- Average 5-year returns of 9.7%
- Average 10-year returns of 7.5%
- Average 20-year returns of 7.2%
Funding Trends Showcase Public Pensions’ Fiscal Discipline
For retirement systems with fiscal year-end dates in the first half of 2025, the average funded ratio was 79.2%, compared with 81.4% for the same period in 2024. The change reflects short-term market volatility as well as year-to-year differences in the reporting sample.
However, among plans that reported data in both years, funded ratios increased by an average of 2.9 percentage points, aligning with findings from other national research that point to improving funding levels driven by strong investment performance and sustained employer contributions.
Systems that received their full actuarially determined contribution reported funded ratios averaging 6.6 (median: 13.2) percentage points higher than those that did not — reinforcing long-standing evidence that paying the full contribution is one of the most effective steps plan sponsors can take to strengthen long-term fiscal health.
Other key findings include:
- Discount rates averaged 6.67%, continuing a gradual, cautious decline
- Amortization periods averaged 18.6 years, with a growing number of systems (24.4%) using layered amortization approaches
“This underscores an important reality: fiscal strength doesn’t come from short-term fixes. It comes from consistent funding decisions made responsibly over time,” added Kim.
Technology, Cybersecurity, and AI Emerge as Growing Focus Areas
The study also highlights a growing focus on technology and operational resilience. While pensions are taking a cautious approach to AI adoption, the pace has picked up significantly.
More than 35% of respondents report using artificial intelligence for at least one purpose, including fraud detection, actuarial forecasting, data modeling, and participant communications — a significant increase compared with prior years.
Top leadership priorities identified for 2026 include maintaining funding levels, modernizing pension administrative systems, and enhancing cybersecurity and fraud prevention efforts.
Context Matters in Benchmarking: Expanded Tools for Members
While NCPERS Public Retirement Systems Study looks at industry trends and fiscal performance, it’s important to remember that each retirement system is unique. With varying state and local regulations and differences in populations served, funding policies, plan sponsor’s fiscal health, and even fiscal year-end dates, benchmarking performance often feels like comparing apples to oranges.
In addition to the published report, NCPERS members have exclusive access to an interactive online dashboard that allows users to filter data by plan size, employee type, and other variables — enabling more meaningful comparisons among peer systems.
The full report is available to download here.
About NCPERS
Since 1941, NCPERS has been the trusted partner for public pension leaders across local, county, and state retirement systems. Through practical education, timely insights, and a welcoming peer community, we help members strengthen their funds and secure the futures of more than 20 million teachers, police officers, firefighters, municipal workers, and other public servants.
Headquartered in Washington, D.C., NCPERS is a 501(c)(3) nonprofit organization proudly representing a diverse membership that includes more than 650 public sector retirement systems, plan sponsors, unions, and service providers who collectively manage approximately $6 trillion in retirement assets.
NCPERS is more than an association. We are the industry’s hub for connection, catalyst for progress, and partner working to strengthen retirement systems for generations to come.
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