Vanguard is cutting investor costs by an estimated $ 190 million through improvements to its target annuity streak

VALLEY FORGE, PA., September 28, 2021 / PRNewswire / – Vanguard today announced its ongoing efforts to meet the changing needs of retirees, retirees and plan sponsors by cutting costs, streamlining investment options and improving its industry-leading offering as of the reporting date.1 The company will consolidate its product line with those planned Mergers of Vanguard Institutional Target Retirement Funds with Vanguard Target Retirement Funds (TRFs), which is expected to result in a lower expense ratio of 0.08% (8 basis points) for each TRF upon completion of the mergers. Vanguard will also offer its 401 (k) customers additional cost savings by meeting the minimum investment requirement for the Vanguard Target Retirement Trust II program $ 100 million from $ 250 million. In addition, Vanguard will launch a new retirement income solution for each of its Target Retirement Trust programs, the Vanguard Target Retirement Income and the Growth Trust. The higher (50%) equity allocation of the new retirement trust is intended for participants whose assets, risk appetite and / or additional sources of income allow for greater discretionary spending in retirement.

“Vanguard will continue to innovate for our customers and our unique customer structure enables us to share our success with our customers through lower fees,” said Tim Buckley, Vanguard Chairman and CEO.2 “With these changes, Vanguard continues to expand its access to cost-effective, diversified, on-time solutions that help more investors achieve a financially secure retirement.”

The TRF mergers are expected to be completed in February 2022. The merged funds will maintain the same investment strategy, asset allocation and glide path based on more than four decades of client insights and investment management expertise. With an expected expense ratio of 0.08%, investors have access to a mature, diversified asset allocation solution at only a fifth of the average industry costs.3 In addition to standardized cost ratios across TRF years, the mergers are also to be realized with additional portfolio management and operational Efficiency as well as economies of scale that can lead to additional cost savings for investors over time.

With immediate effect, the Vanguard Target Retirement Trust II will receive a new lower one $ 100 million Minimum, which means that plan sponsors and their employees can access even more cost-effective date options. Since its inception in 1975, Vanguard has added value to its shareholders by cutting expense ratios and investment minimums more than 2,000 times across asset classes, product types and strategies. Over the past year, Vanguard has reduced costs across the Target Retirement Trust (TRT) range by 5-10% and implemented portfolio management policies designed to reduce TRF and TRT transaction costs. It is estimated that the latest updates on Vanguard’s target date lineup will be delivered $ 190 million in the aggregate savings for retirement savers in 2022.4

Continuous innovation in retirement
Vanguard is also expanding its retirement income solutions with the Vanguard Target Retirement Income and Growth Trust, which is available for eligible defined contribution plans. The higher (50%) equity allocation of the new retirement trust is intended for participants whose assets, risk appetite and / or additional sources of income allow for greater discretionary spending in retirement. The new trust is designed as an opt-in alternative to the lower equity allocation (30%) of the Vanguard Target Retirement Income Trust – best suited for participants whose primary investment objective is a stable inflation-adjusted income to cover the cost of living. As participants near the age of 65, tools and guides will be provided to help them determine the trust option that best suits their needs. Vanguard’s expanded retirement income capabilities will allow more participants to stay on their 401 (k) plan upon retirement and continue to benefit from institutional pricing and fiduciary oversight.

“For more than two decades, Vanguard’s Target Retirement range has improved future financial security for investors by delivering sophisticated asset allocation and a disciplined, long-term strategy in an all-in-one fund offering,” said John James, Managing Director and Head of the Vanguard Institutional Investor Group. “Our new retirement income offering underscores our close partnership with sponsors who are increasingly looking for additional tools to guide the financial well-being of their participants into retirement and beyond.”

As the largest defined contribution asset manager in the industry, Vanguard uses its expertise, experience and skills to deliver world-class retirement solutions to plan sponsors and their participants.5 Vanguard recently launched its innovative advisory programs – Vanguard Digital Advisor and Personal Advisor Services – within DC- Plans. In addition, this year the company presented a modernized online offering for participants that is intended to facilitate decision-making, increase savings rates and improve participants’ chances of a secure retirement.

Investments in Target Retirement Funds and Trusts are subject to the risks of the underlying funds. The year in the fund or trust name refers to the approximate year (the target date) in which an investor in the fund will retire and leave his or her staff. The fund or trust will gradually shift its focus from more aggressive to more conservative investments based on its target date. The Vanguard Target Retirement Income Fund and Trust and Vanguard Target Retirement Income and Growth Trust have a fixed asset allocation and are designed for investors who are already retired. An investment in a target pension fund or trust is not guaranteed at any time, including on or after the target date.

About Vanguard
Vanguard is one of the world’s largest investment management companies. away August 31, 2021, Vanguard did it $ 8.3 trillion in global wealth. The company based in Valley Forge, Pennsylvania, offers its more than 30 million investors worldwide 417 funds. Visit vanguard.com for more information.

All numbers off August 31, 2021 Unless otherwise stated.

For more information on Vanguard funds, please visit vanguard.com for a prospectus or, if available, a summary prospectus. Investment objectives, risks, fees, costs and other important information about a fund are contained in the prospectus; read and consider carefully before investing.

All investments are subject to risk, including the possible loss of the money you have invested.

There is no guarantee that any particular asset allocation or mix of funds will achieve your investment objectives or provide you with any particular level of income. Diversification neither secures a profit nor protects it from losses.

Vanguard Target Retirement Trusts are not mutual funds. They are collective trusts available only to tax-privileged plans and their eligible participants. Investment objectives, risks, fees, costs and other important information should be carefully considered before investing. The collective fiduciary mandates are administered by the Vanguard Fiduciary Trust Company, a wholly owned subsidiary of Vanguard Group, Inc.

Vanguard Digital Advisor’s services are provided by Vanguard Advisers, Inc., a government registered investment advisor. You can find important details about this service at vanguard.com/digitalbrochure. Vanguard Digital Advisor’s financial planning tools provide forecast and target achievement projections that are hypothetical in nature. They are provided for educational purposes only and are not a guarantee of future results.

Vanguard Personal Advisor Services are provided by Vanguard Advisers, Inc., a registered investment advisor, or by Vanguard National Trust Company, a government-approved limited-purpose trust company. The services for clients who choose to receive ongoing advice vary depending on the amount of assets in a portfolio. For an overview of the service, see the Vanguard Personal Advisor Services brochure.

VAI is a subsidiary of VGI and a subsidiary of VMC. Neither VAI nor its affiliates guarantee profits or protection against loss.

Vanguard Marketing Corporation, distributor.

1 Vanguard and Morningstar, ex June 30, 2021. Vanguard is the largest TDF manager in the industry.
2 Vanguard is owned by the customers, which means that the fund shareholders own the funds, which in turn are the owners of Vanguard.
3 Morningstar, ex December 31, 2020
4 The estimated savings include the expected savings by reducing the minimum investment of the Target Retirement Trust to $ 100 million from $ 250 million and expected reduction in the expense ratio of the target pension funds to 0.08% (8 basis points). The savings in the expense ratio reflect the difference between previous and current expense ratios multiplied by the average AUM. The average AUM is based on the daily average assets during a month, which is then averaged over the 12 months of the financial year.
5 Retirement provision & capital investment, status December 31, 2020

SOURCE Vanguard

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