Public pension funds in US states are facing their worst year of losses in history, exacerbating existing funding shortfalls and putting pressure on government to shore them up.

In the nine months to the end of September, the average state pension fund lost 14.8 per cent, according to Northern Trust, a fund company. The loss has grown since as financial markets slumped further in October. The previous highest loss for state funds was 7.9 per cent for the full year in 2002.