Vanguard Adds Guaranteed Lifetime Withdrawal Benefit Feature to the Vanguard Variable Annuity

New feature complements the firm’s existing low-cost retirement options

VALLEY FORGE, Pa.--(BUSINESS WIRE)--Vanguard has added an optional Guaranteed Lifetime Withdrawal Benefit (GLWB)* rider to its low-cost Vanguard Variable Annuity**. This rider, issued by Monumental Life Insurance Company***, combines the benefit of low-cost Vanguard investments with the guarantee of a well-known insurance company.

“The compelling benefit of the GLWB is that it provides a guaranteed income stream for life, but still lets annuitants tap into their principal if and when they need to.”

A GLWB is an optional rider that, when added to a variable annuity contract for an additional fee****, guarantees that a fixed percentage of the Total Withdrawal Base can be withdrawn annually for the annuitant’s lifetime (and that of his or her spouse, if desired) to provide a steady income stream. These withdrawals continue for life, regardless of market performance and even if the account value is exhausted. Unlike traditional annuitization, Vanguard Variable Annuity clients electing the GLWB retain access to their principal and can stop taking withdrawals at any time without incurring a penalty. Upon death, any remaining accumulated value will go to a beneficiary*****.

Stephen Utkus, principal and director of the Vanguard Center for Retirement Research, explained that although variable annuity contract owners have always had the option to annuitize, less than 1% of variable annuity assets were converted to traditional annuity payouts in 2010, in part because it requires relinquishing access to the accumulated cash value of the annuity (source: LIMRA 2010 Annuity Yearbook).

“The perceived downside to traditional annuitization is that it doesn’t meet a retiree’s competing desires. Retirees want to ensure they have a regular income to meet spending needs in retirement; yet at the same time, they want to retain access to their assets in case of large health expenses or to leave a bequest to heirs or charity,” said Mr. Utkus. “The compelling benefit of the GLWB is that it provides a guaranteed income stream for life, but still lets annuitants tap into their principal if and when they need to.”

GLWB withdrawals can begin anytime after age 59, and the withdrawal percentage is based on age at the time of the first withdrawal and whether the single or joint life option is elected. During rising markets, available annual withdrawals may also increase.

If withdrawals or market declines deplete the accumulated value in the designated investments, the insurance company will continue to make payments for life. In exchange for these benefits, the GLWB rider comes with an additional cost; investors pay an additional expense of 0.95%****** of the Total Withdrawal Base per year.

The rider will be available on three portfolios within the Vanguard Variable Annuity:

• An existing Balanced Portfolio, which is actively managed by Wellington Management Company, LLP, and invests 60%-70% in stocks and 30%-40% in bonds.
• A new Moderate Allocation Portfolio, which invests 60% of its assets in stocks and 40% in bonds, and employs an index approach.
• A new Conservative Allocation Portfolio, which follows an index approach and invests 40% of its assets in stocks and 60% in bonds.

The Vanguard Variable Annuity has been offered since 1991. It includes 17 diversified investment options. Total costs, including fund expenses, administrative fees, and M&E charges (for the accumulated value death benefit option), range from 0.36% to 0.81%. These costs exclude optional riders, including the annual GLWB rider fee.

In addition to the GLWB, Vanguard offers investors in or approaching retirement a wide range of products and services to develop a robust retirement income program. These include:

• Vanguard Managed Payout Funds – funds-of-funds designed to provide regular cash distributions to help retirees meet monthly expenses, while at the same time help preserve and/or grow their assets for heirs or philanthropy.
• Vanguard retirement income plans developed by a Certified Financial Planner™.
• Vanguard Annuity Access™, powered by Hueler Companies’ Income Solutions® platform – a web-based annuity service that enables individuals to compare income annuities from leading insurance companies.
• Vanguard Target Retirement Funds and LifeStrategy Funds – Vanguard’s 12 Target Retirement Funds offer a diversified, balanced portfolio that generally becomes more conservative as investors approach retirement and beyond. Vanguard LifeStrategy Funds are also balanced funds-of-funds, but with an asset allocation that seeks to remain constant over time. They are offered in sets ranging from aggressive to conservative, with the investor determining which portfolio is appropriate for their circumstances at any given time.

Investments in Target Retirement Funds are subject to the risks of their underlying funds. The year in the Fund name refers to the approximate year (the target date) when an investor in the Fund would retire and leave the work force. The Fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. An investment in the Target Retirement Fund is not guaranteed at any time, including on or after the target date.

To help investors consider their retirement income options, Vanguard offers extensive resources on its website (www.vanguard.com/retirementsolutions). Educational materials include a brochure titled “Income that can last a lifetime.” It explores various annuity options to consider for guaranteed income, comparing such features as access to assets, fluctuation of payments, inflation protection, investment options, and tax consequences of withdrawals.

About Vanguard

Vanguard, headquartered in Valley Forge, Pennsylvania, is one of the world’s largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages approximately $1.55 trillion in U.S. mutual fund assets. Vanguard offers more than 170 index and actively managed funds to U.S. investors and more than 60 additional funds in non-U.S. markets.

*Product guarantees are subject to the claims-paying ability of the issuing insurance company.

**Morningstar Inc., December 2010. The Vanguard Variable Annuity has an average expense ratio of 0.59% versus the annuity industry average of 2.42%; excludes fees for optional riders.

***In New York state only, the annuity is issued by Transamerica Financial Life Insurance Company.

****The rider fee will be deducted from each designated investment on the rider date and on each rider quarter. The rider fee for future premium payments into the designated GLWB investments could be higher or lower, but not more than the maximum of 2.0%.

*****Variable annuities are long-term vehicles designed for retirement purposes and contain underlying investment portfolios that are subject to the investment risk, including possible loss of principal.

******GLWB rider fee as of October 2011.

All asset figures are as of September 30, 2011, unless otherwise noted.

The Vanguard Variable Annuity is a flexible-premium variable annuity issued by Monumental Life Insurance Company, Cedar Rapids, Iowa (NAIC No. 66281), and in New York State only, by Transamerica Financial Life Insurance Company, Harrison, New York (NAIC No. 70688). Form No. VVAP U 1101 (in Florida, Form No. VVAP U 1101 (FL) Oregon, Form No. VVAP U 1101 (OR) (R), and New York VVA NY 0208). GLWB Rider Form No. RGMB 43 0811 (in Florida, RGMB 43 0811 (SI)(FL), RGMB 43 0811 (JT)(FL), Oregon RGMB 43 0811 (SI)(OR), RGMB 43 0811 (JT)(OR), and in New York RGMB 43 0811 (SI)(NY), RGMB 43 08111 (JT)(NY)) without agent representation. Policy and rider form numbers may vary by state and may not be available in all states. The Vanguard Group administers the Vanguard Variable Annuity for the issuer. Its variable annuity and investment costs rank among the lowest in the industry, according to Morningstar, Inc., December 2010.

The Vanguard Group, Monumental Life Insurance Company, and Transamerica Financial Life Insurance Company do not provide tax advice. Investors are encouraged to consult a tax advisor for information on how annuity taxation applies to their individual situations.

Any withdrawal taken before age 59 1/2 could be subject to a 10% federal penalty tax. Excess withdrawals will reduce the income from the GLWB. GLWB withdrawals can begin following the rider anniversary after the annuitant turns age 59 (based on the younger spouse for joint life options). Any withdrawal taken before age 59½ could be subject to a 10% federal penalty tax. Excess withdrawals will reduce the income from the GLWB. GLWB withdrawals can begin following the rider anniversary after the annuitant turns age 59 (based on the younger spouse for joint life options).

The Managed Payout Funds are not guaranteed to achieve their investment objectives, are subject to loss, and some of their distributions may be treated in part as a return of capital. The dollar amount of a fund’s monthly cash distributions could go up or down substantially from one year to the next and over time. It is also possible for a fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its distributions to shareholders under its managed distribution policy. An investment in a fund could lose money over short, intermediate, or even long periods of time because each fund allocates its assets worldwide across different asset classes and investments with specific risk and return characteristics. Diversification does not necessarily ensure a profit or protect against a loss in a declining market. The funds are proportionately subject to the risks associated with their underlying funds, which may invest in stocks (including stocks issued by REITs), bonds, cash, inflation-linked investments, commodity-linked investments, long/short market neutral investments, and leveraged absolute return investments.

Mutual funds, like all investments, are subject to risks. Each LifeStrategy Fund invests in broadly diversified Vanguard funds and is subject to the risks associated with those underlying funds.

Vanguard Annuity Access is provided by Vanguard Marketing Corporation and is offered in collaboration with Hueler Investment Services, Inc. through the Income Solutions platform. Income Solutions is a registered trademark of Hueler Investment Services, Inc. and used under license. United States Patent No. 7,653,560. Vanguard Annuity Access is provided by Vanguard Marketing Corporation, d/b/a VMC Insurance Services in California. Products may not be available in all states.

Vanguard annuity specialists are licensed through Vanguard Marketing Corporation.

All investments are subject to risk.

For more information about Vanguard funds, visit www.vanguard.com, or call 800-662-7447, to obtain a prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.

Vanguard Marketing Corporation, Distributor of the Vanguard Funds.

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