Independent Review of the Transamerica Variable Annuity Series L-Share

What’s covered in this Review?Transamerica Logo

In this review we’ll cover the following information on the Transamerica Variable Annuity Series L-Share:

  • Product Type
  • Fees
  • Current Rates
  • Realistic long term investment expectations
  • What to expect, and what not to expect

The Series L-Share is a variable annuity offering from the folks at TransAmerica that allows you to customize your annuity with several living benefits and death benefit options. To understand the significance of these choices requires a little investigating because variable annuities can be difficult to understand and expensive to own.

Annuities have been gaining in popularity as more and more Americans are retiring without the kinds of defined-benefit pensions that pay out regular income. Annuities are really the only kind of investments that can give you regular income payments, however, not all annuities are created equal. It is the KIND OF ANNUITY that determines how much income you will get, what that income will cost you, and how protected your money will be.

Perhaps the most important thing you can do to determine whether an annuity is right for you is to identify what financial phase you are in before you buy. The benefits offered by Transamerica’s variable annuity series speak to the two different time periods in the life of the investment: the accumulation phase and the income phase.

This is also a good way to look at the life of the investor, so let’s take a minute to define these terms.

  • The accumulation phase is when your goal is to invest and grow your money.
  • The income phase is when your goal is to structure your investments for pension-like payouts.

Now the thing about all variable annuities, in general, is that they are designed to be a one-size-fits-all solution to BOTH phases. They can grow your money AND structure it for income. Sounds pretty easy, right? Which is why so many financial salespersons advertise variable annuities as the perfect solution to all your retirement planning needs but are they really?

Variable annuities are far from perfect.

Why? Inside a single investment, the two goals of investing and structuring income are at odds with each other – much like cats and dogs they basically don’t get along – which is why these annuities can get so expensive and hard to untangle.

That doesn’t mean annuities are a bad idea, however. They are definitely worth a second look if you are retiring without a pension because they can offer attractive income benefits and roll-up options

that have a similar look and feel as a Social Security benefit. This can help hedge against inflation while you are making your withdrawals or grow your money for later needs depending on the kind of annuity you choose. And this, ladies and gentlemen, is why we founded Annuity Gator.

Annuity and Retirement Income Planning Information That You Can Trust

Welcome to Annuity Gator, a comprehensive database of unbiased annuity reviews. As a team of experienced financial professionals, we strive to publish complete and the highest quality annuity reviews available on the Internet today with the goal of educating you, the consumer.

We do this because we believe that an educated investor makes better choices, and it’s the details with these annuities can make the difference between a comfortable retirement and running out of money. We think you deserve to know about the details.

If you’ve been looking for answers to your questions about annuities, you’ve probably been bombarded with bold advertising claims such as:

  • Highest Payouts
  • Lowest Fees
  • Top Rated Companies
  • Guaranteed Income For Life
  • Professional money management
  • Earn 7-8% Returns With NO Market Risk

Are any of these claims true? How these benefits are calculated and what they can actually give you in terms of a return is sometimes misrepresented or even misunderstood. Advisors selling variable annuities might make it sound as if these products give you returns upwards of 7 or 8% with no risk to your principal. Other websites are absolutely against all annuities in general but have no idea how they really work. Neither of these approaches is helpful to you.

We’ve discovered that none of these “benefits” really even matter without first understanding your primary reason for buying an annuity in the first place. Only you know what you really need, so we invite you to keep your goals in mind as you read about our findings.

Ready to dig in? Let’s begin:

Transamerica Variable Annuity Series L-Share at a Glance:

Product NameVariable Annuity Series L-Share
Issuer Transamerica Life Insurance Company
Standard & Poor’s RatingAA‐ is 4th highest of 21 ratings (as of May 12, 2016)
Phone Number1-800-797-2643
Website www.TransAmerica.com

Opening Thoughts on the Transamerica Variable Annuity Series L-Share

The Series L-Share is offered by the highly rated Transamerica insurance company as a customizable annuity that can give you access to professionally managed funds and an annuitized income stream. Its tiered surrender charge schedule means you can get out of your investment in four years’ time without additional fees (known as surrender charges), however, once your money is annuitized, things change.

As a hybrid investment designed to do two things, the benefits offered inside the Series-L are pretty diverse, which might mean you end up paying for more bells and whistles than you really need.

On the investment side of things, you have a selection of mutual funds subject to market fluctuation, investment risk, and the possible loss of principal, all in exchange for tax-deferred growth. As an investment vehicle wrapped up in an insurance wrapper, this might be an appropriate investment if you have plenty of time on your side and are in the accumulation phase of your financial life. Be aware, though, that you will still have to pay the extra fees charged by the insurance company. If you have already maxed out your IRA and 401(k) options, then it might make sense to pay these fees in order to capitalize on tax-deferred growth.

If income is your goal and you are rolling over money from an IRA or 401(k), then you probably do not need to take advantage of tax deferred growth on your money. This money has already accumulated tax deferred, so moving it into a variable annuity like this one only means more fees for you to pay and more commissions to your financial salesperson. So why would a retiree want a variable annuity?

The fear of inflation and rising health care costs has many retirees convinced they need to remain aggressive about the returns they earn. They are also sometimes convinced that a variable annuity is a place to do this because variable annuities give you market growth while also providing guaranteed income.

The L-Share gives you access to penalty-free withdrawals (from the insurance company) after the first four years; however, any withdrawals you take will reduce your optional benefit amounts. And yes, that includes guaranteed benefit amounts.

Furthermore, you will pay higher annual fees for this privilege of access, and during the income phase, once you annuitize, you cannot, generally speaking, take out any other withdrawals, full or partial.

If income is your goal and you are rolling over money from a 401(k) or another tax-deferred vehicle, you should know that there are other annuities out there with much lower fees that offer similar if not better-guaranteed benefits.

This might be a bad surprise for you if you’ve been listening to variable annuity sales claims and advertisements. The way your actual income amount is calculated is based on the underlying fund performance of the investments, but before we get into these super-fun details, let’s take a break for some legal disclaimers . . .


This is an independent product review, not a recommendation to buy or sell an annuity. Transamerica has not endorsed this review in any way nor do we receive any compensation for this review. This review is meant to be an independent review at the request of readers so they could see our perspective when breaking down the positives and negatives of this particular model annuity. Before purchasing any investment product, be sure to do your own due diligence and consult a properly licensed professional should you have specific questions as they relate to your individual circumstances. All names, marks, and materials used for this review are the property of their respective owners.

How Transamerica Describes the Variable Annuity Series L-Share:

Transamerica advertises the benefits and features of this annuity on their website as follows:

  • Ability to customize your annuity with optional living and death benefits.
  • Grow and protect your retirement income.
  • A four-year surrender charge schedule.
  • Transfer your assets to loved ones.

There are also a few other perks, but that covers the basics. If you want to find the website and/or prospectus, you can click HERE.

How Financial Advisors Might Present This Annuity to You

The L-Share variable annuity might be presented as the perfect compromise: grow your money tax deferred and structure it for income later. If you want your money back, no problem – after four years, the surrender charges are waived. This sounds like a good deal, the only problem is, the returns that your financial salespersons talk about may not be the reality of what you experience.

If you are being sold this annuity as the place to put your 401(k) or IRA money, rolling your money into a variable annuity means you might be paying higher fees for a benefit that you already have. If you are in the income phase of your life and guarantees are important, then you should know that inside the Series L-Share, your principal balance is not guaranteed to grow at the enhanced rates advertised.

While the prospectus for this particular annuity warns that this product “does NOT guarantee profits or prevent losses in a declining market,” your financial salesperson might not be upfront about this fact because you can buy guarantees with this annuity.

The guarantees are called riders, and while every annuity charges a fee for its riders, the way in which they calculate your income is different depending on which income benefits you choose. This is how your financial salesperson might explain things to you:

  • This investment performs better than other annuities out there.
  • It will give you security by providing a guaranteed lifetime income.
  • The benefit will grow or step-up every year that you wait to access it.

Does this investment really perform better? There are nearly a 100 different funds offered inside this investment, and that might sound like a lot, but if you are in your accumulation phase, know that you can access an even larger choice of quality funds without having to pay the fees on the insurance side of things.

To compare the fees from the insurance ends on the Series L-Share with other variable annuities offered by this company: the fees are not as high as the C-Share but they are higher than the B-Share.

Your financial salesperson might say that these annuities perform so well, they far outweigh the minor cost in fees. After all, 1.50% doesn’t sound too terrible, right? Be warned that the insurance company is required to tell you about the fees that they charge, but they don’t have to tell you about all the fees on the investment side of things. To figure those out, you have to go digging through the prospectus.

So how much will this investment actually cost you? First, let’s take a look at the fee to structure that guaranteed lifetime income.

The income benefits offered by the purchase of benefit riders calculate the returns on your investment differently so you get more guarantees. For the Series L-Share, the enhancements guarantee a return as high as 5.5%, and sometimes this percentage is presented to consumers as the earnings on the investment funds themselves. Don’t be fooled!

This percentage is used to guarantee the payment of your optional benefits. It does NOT guarantee the performance of the underlying investment funds. So what does this mean to you?

Just because the rider on your account promises a higher return doesn’t mean this annuity can give you more income than other annuities. What the Transamerica Series L-Share does do particularly well is to give you a lot of options. This is one variable annuity with a flexible menu of income payouts choices, some which allow you to stop and start withdrawals, other which allow you to choose higher payout amounts for the first few years, and lower amounts for subsequent years.

However, the enhanced growth rates promised by the riders build money up in a separate account. We sometimes call this account “funny money” because it’s not real money you can take out whenever you want. The actual value of your account and the money you can access without surrender fees is what Transamerica calls the “withdrawal base”.

It makes sense to assume that if you have a withdrawal base growing in the market earning returns in addition to that 5.5% enhancement, then you will then get a higher income payout amount. This is sometimes what investors are led to believe when financial sales people pitch these kinds of annuities, but the reality is much different.

With the Series L-share, you have to remember this is a variable annuity, which means the withdrawal base can go up and down in value. This means your fees can go up, your investments can be restricted, and your income may not be as high as other annuities that don’t have a fluctuating withdrawal base.

The benefit fee for these riders is a percentage of the withdrawal base, which is why in very tiny words the prospectus tells us that the amount of the fee will also fluctuate as the withdrawal base increases or decreases. In the event your actual policy value goes down in value, the fee amount could be a much higher percentage of your policy value.

What About the Fees

One thing that is nice about the Series L-Share variable annuity is that there is no front-end sales load charge. However, there is still a risk management fee charged by the insurance company known as the Mortality and Expense Risk fee (M&E) and an administration charge.

If you want your variable annuity to grow at a promised or guaranteed rate, and you want income or the ability to keep this money in the family, then you will be charged for a death benefit rider or enhancements as well as or in addition to the income rider. Plus, each of the investment funds inside the variable annuity has a portfolio operating expense and a fund facilitation fee.

Because there are so many different ways to customize this annuity, it’s difficult to get an accurate high and low-end range of fees. But to give you an idea, here is a breakdown of all the fees listed by the Series L-Share marketing material and the fees we dug up from inside the prospectus:

  • Mortality and Expense Risk Fee: 1.35%
  • Administration Charges: 0.15%
  • Front-End Sales Load on Purchases Payments: 0%
  • Annual Service Charge: 0 to $50
  • Optional Death Benefit Rider: 1.65% to 1.85%
  • Optional Income Benefit Rider: 1.25% to 2.30%
  • Fund Facilitation Fees: .20% to .30%
  • Portfolio Operating Expenses: .54% to 2.86%

Fee Total: 5.14% to 8.81%.

The Annuity Gators End-Take on the Transamerica Variable Annuity Series L-Share.

Where it works best:

  • A place to grow money tax deferred for someone already taking advantage of the maximum IRA and 401(k) amounts.
  • An accumulation vehicle for someone who wants access to money.
  • As a source of guaranteed income delivered by a reliable company.
  • Benefits that can continue for a spouse and cannot be outlived.

Where it works WORST:

  • For investors who have already grown their money tax-deferred and are entering into retirement.
  • For the investor who does not want to pay a lot of fees.
  • For investors who have a low-risk tolerance.
  • For investors who do NOT want to be in the stock market.

In Summary

The L-Share variable annuity offers a four-year structure for their surrender charges, access to stock market funds, and guaranteed lifetime income and benefit options inside one investment. All of these benefits, however, are operating inside an investment exposed to market risk, which can make it an expensive way to get a guaranteed income.

In terms of growth, the Series L-Share offers investors access to a series of professionally managed funds, but the insurance companies are not required to explain all the fees that may be associated with these funds. Furthermore, the rate of returns often promised by financial salespersons who sell this annuity isn’t a guaranteed interest rate of the growth of the funds, but rather are part of the 5.5% enhanced benefit only available with the purchase of a benefit riders for which you pay extra.

As an income producing investment, this annuity does a good job of offering a menu of flexible income options, including lifetime income for both spouses. However, if you are entering the income phase of life and rolling over a pot of money that has already grown tax deferred, then why would you want to pay more fees due to risk exposure that you don’t need?

So what does all this mean to you? Due to its exposure to market risk, the amount of actual income paid out by the Series L-Share may be lower than other annuities, especially when you add up all the fees inside this investment. The Series L-Share variable annuity does give you choices: it offers a number of different ways to customize the income options and death benefit options to give you enhanced growth. We warn that these enhanced rates are often sold to the consumer as the actual rate of returns from the investments funds themselves, which are expensive and can lose you money.

Thanks for bearing with us on this rather long post. If you found it helpful, please spread the word and share it with others.

Lastly, like all humans – we do make mistakes. If you see one on this review please reach out and let us know since this annuity’s terms may have changed since we published this review. We are always more than happy to make corrections and give credit where it is due. If you’re an investor and this review causes confusion and creates questions, feel free to reach out as well. We can’t always get back right away, but we can usually clear up any questions within a day or two.

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