The National Conference on Public Employee Retirement Systems has released its 2026 Public Retirement Systems Study, drawing on 149 public pension plan sponsors that together represent roughly 18.1 million members. These are the institutions that must write benefit checks for decades regardless of what markets do — and the way they have repositioned their portfolios is worth studying, even if your retirement account is a fraction of their size.
The Headline Shift: Less Public Stock
The most striking finding is how far pensions have pulled back from public equities. As of the first half of 2025, the average allocation to equities stood at 38%, down from 51.4% in the first half of 2021. That is a decline of more than 13 percentage points in four years.
That money did not sit in cash. Fixed income rose to 24.5% from 22%, and alternative investments — private equity, real assets, infrastructure and similar holdings — climbed to 31.8% from 24.5%. In other words, pensions did not simply de-risk; they rebuilt the return engine using assets that behave differently from the stock market.
Lower Expectations, Not Panic
Pensions have also been quietly walking down what they expect to earn. According to the study, 7.5% of funds lowered their assumed rate of return within the past year, and 57.9% had already lowered it more than a year ago. The average assumed return for non-defined-contribution plans sits at 6.92%, with plans reporting in the first half of 2025 averaging 6.67%, down from 6.77% a year earlier. The median discount rate has held steady at 7%.
This is happening despite strong results. Net-of-fees returns came in at 10.2% over one year, 9.7% over five years, 7.5% over ten years and 7.2% over twenty. Institutions posting double-digit one-year gains are still lowering their forecasts — a useful corrective for anyone extrapolating recent performance into their own retirement projections.
Funded status dipped modestly, to an average of 79.2% for plans with fiscal year-ends in the first half of 2025, down from 81.4% a year earlier. NCPERS CEO Hank Kim framed the long view directly: "As long-term investors, public pensions are built for exactly these moments."
Four Practical Takeaways
Diversify beyond the stock-bond binary. Pensions increased both fixed income and alternatives. Individual investors have more limited access to private markets, but the underlying principle — holding assets that do not all move together — applies at any account size.
Anchor your plan to a conservative return assumption. If professional funds with full-time investment staff are planning around roughly 6.7% to 7%, a retirement projection built on 10% annual returns deserves a second look.
Watch what you pay. The study puts combined manager and administrative expenses at approximately 70 basis points. Fees compound against you exactly the way returns compound for you.
Contributions matter more than cleverness. Plans that received their full actuarially determined contribution posted funded ratios 6.6 percentage points higher than plans that did not. The institutional version of "just keep funding it" is the single most reliable variable in the entire study.
None of this argues for abandoning stocks. It argues for building a plan you can hold through a bad decade — which is precisely the problem pensions are engineered to solve.
This article is for educational purposes only and does not constitute investment advice. Consult a qualified financial professional about your individual situation.
Sources: NCPERS 2026 Public Retirement Systems Study; Chief Investment Officer (ai-cio.com); National Conference on Public Employee Retirement Systems