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Rising stocks push U.S. public pension assets to record highs

A trader works on the floor of the New York Stock Exchange shortly after the market opening December 16, 2013. REUTERS/Lucas Jackson
A trader works on the floor of the New York Stock Exchange shortly after the market opening December 16, 2013. REUTERS/Lucas Jackson

WASHINGTON (Reuters) - The holdings of U.S. public pensions again reached record highs during the third quarter, as the stock market surged and governments and employees pitched in billions of dollars, according to U.S. Census data released on Thursday.

The cash and security holdings for the 100 largest public-employee retirement systems in the country, representing almost all public pensions, reached $3.06 trillion in the third quarter of 2013, a 9.8 percent rise from the same quarter in 2012 and a 4 percent increase from the previous quarter.

Investments provide the lion's share of public pension revenues, and retirement systems are reaping the benefits of the stock market's gangbuster performance this year. The benchmark Standard & Poor's 500 Index <.SPX> has delivered a total return, including reinvested dividends, of 29.6 percent so far this year, putting it on pace for its best year since 1997. Through the third quarter, its total return was 19.8 percent.

Corporate stocks, making up about a third of pension holdings, hit $1.06 trillion in the quarter, 11.4 percent more than in the third quarter of 2012 and 3.8 percent more than the prior quarter. International securities, a much smaller pool, rose 16.6 percent over the year to $637.8 billion.

Altogether, the pensions' investment earnings totaled $120.13 billion in the three months that ended on September 30, the largest quarterly gain since the first quarter of 2012.

During the 2007-09 recession, the financial crisis caused pension investments to crumble just as states confronting collapsing revenues cut their pension contributions and laid off employees. Pensions have slowly marched back to health since holdings reached a low of $2.1 trillion in 2009.

For the first three quarters of this year pension holdings have hit record highs.

Still, the pensions' fixed-income performance has been mixed. Bonds have been lagging in recent months over concerns about the future of the Federal Reserve's massive bond-buying stimulus program, which the central bank said on Wednesday it would begin reducing in January.

In the third quarter corporate bond holdings were $323.2 billion, moderately higher than the second quarter's $321.5 billion but 7.1 percent lower than $347.8 billion in the third quarter of 2012.

Treasury holdings fell 0.2 percent from the second quarter to $265.7 billion, but rose 8.1 percent from the third quarter of 2012.

Governments across the country have reformed pension policies in the aftermath of the funding crisis. Some began making the full contributions that their actuaries suggest. Others have had employees pitch in more, raised retirement ages, and cut annual cost of living adjustments to benefits.

Governments, essentially the taxpayers, put $22.2 billion into public pensions in the third quarter. That was 3.2 percent less than the previous quarter, but 14.5 percent higher than the third quarter of 2013 and the largest amount for the third quarter on record.

Employees put in $8.3 billion, a plunge of 27.5 percent from the quarter before. Still, it was 3.9 percent higher than the same period in 2012 and the largest third quarter amount on records going back to 1974.

Benefit payments, which had steadily risen since the third quarter of last year, eased during the quarter - to $57.71 billion from $60.85 billion in the second quarter. (Reporting By Lisa Lambert; Editing by David Gregorio)

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