The health of public pension funds in the US has improved markedly, according to new research. This will reduce fears that ailing retirement plans could push cities across the US into Detroit-style bankruptcies.

According to figures from the National Conference on Public Employee Retirement Systems, a trade body for public pensions, US state and city retirement systems are closing a huge funding hole that has emerged since the financial crisis.

The average funding ratio — a measure of assets to liabilities — of US public pensions increased to 76 per cent in 2016, up from 74 per cent in 2015.

A combination of lower costs, stronger returns and rising bond yields have helped increase the cash levels of pension funds, although they remain a long way from the 95 per cent funding level reported in 2007.

The funding deficits of public pension funds jumped after the financial crisis, putting enormous pressure on cities and states to cut spending or raise taxes. This led to concerns that some retirement funds might not be able to pay out in future.