MetLife’s Monthly Income Plan – Review
Given the uncertainties caused by the volatile economic conditions, people look for a product that guarantees a regular monthly income for a longer period. Monthly Income Plans (MIPs) fit the bill. While some invest in MIPs for a regular income, others look at them from asset allocation perspective. The various agencies offering MIPs in India are Post Office, Mutual Funds, and Banks. The latest entrant is MetLife India Insurance. It is the first life insurer to launch an MIP – ‘Met Monthly Income Plan’ – which provides guaranteed regular monthly income along with other regular benefits like tax incentives and bonuses.
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Background
MetLife India Insurance Company Limited is a subsidiary of MetLife, Inc., a leading insurance provider in the world. It is a joint venture (JV) between MetLife International Holdings, Inc., the Jammu & Kashmir Bank Ltd, and other private investors. For the last 30 months, MetLife India has been ranked among the top three fastest-growing life insurance companies in India. It bettered its performance by 40 per cent in the last financial year when the insurance industry was going through a lean patch.
Product highlights
- Guaranteed monthly regular income for a longer period, i.e., 15 years
- Limited premium payment terms i.e. 5 years and 10 years
- The minimum and maximum age for entry is 18 years and 65 years respectively
- Flexibility to choose policy term and premium payment term
- Limited pay options to suit an investor’s income cycle
- Accrued simple reversionary bonuses and terminal bonus, if any, as declared by the company
Benefits
- Monthly regular income for 15 years or 180 months after the end of the premium payment term
- Simple reversionary bonuses along with the terminal bonus, if any
- Guaranteed death benefit equal to 25 per cent of the sum assured plus all accrued bonuses (non-guaranteed), payable immediately on death, during and after the premium payment term
- Guaranteed monthly regular income after the death of insured – if the monthly income has already commenced, the remaining monthly income instalments will be paid to the nominee
- Guaranteed payment of an additional sum assured in case of accidental death, if Accidental Death Benefit rider has been opted by the insured
Analysis
Under MetLife Income Plan, a 40-year old requires to invest Rs 35,541 per year for a period of 10 years to get a monthly income of Rs 2,500 for the next 15 years. The person will start receiving income 180 months after the initial premium payment term of 10 years. His sum assured will be Rs 4,50,000, i.e., 180 times the monthly premium.
There will also be a maturity benefit of Rs 5,19,992 for him, at an annual growth of 10 per cent. Maturity benefit depends upon the flows of simple reversionary bonuses and terminal bonus declared by the company. Along with the policy, the person can also get a guaranteed accidental death benefit rider at a nominal cost. The rider pays an additional sum, equal to the sum assured opted, in case of unfortunate death of the insured due to an accident.
Equating with other products
There are ample MIP schemes in the market, offering guaranteed monthly returns. Some of the prominent ones are Post Office Monthly Income Scheme (MIS) and Bank-sponsored Monthly Income Plans (MIPs). However, these schemes do not provide guaranteed death benefit, which is limited to fund value or accumulated amount only, unlike Met MIP.
Now, let us compare Met MIP with the options providing similar benefits. Consider an investor who makes an annual investment of Rs 33,190 in PPF for 10 years and at the same time buys a pure term plan of Rs 5,00,000 at an annual premium of Rs 2,351 for 10 years. After 10 years, his PPF corpus will grow to Rs 4.81 lakh. This amount when invested in Post Office MIS will give a monthly income of Rs 3,205 pre-tax deduction or Rs 2,885 post-tax deduction under 10 per cent tax bracket along with a guaranteed bonus of Rs 24,040. The process continues for a period of 15 years, providing an additional income per month as highlighted in the Table.
Let us also look at a combination of PPF and LIC Jeevan Akshay VI with return of purchase price. Here, the PPF proceed is invested in LIC Jeevan Akshay VI which provides a monthly income of Rs 7,000 or an annual income of Rs 33,670 for a 50-year old.
In case of Met MIP, if the company pays a bonus of Rs 5.2 lakh (not assured; the amount can vary based on company’s performance) at the end of term, the plan’s annualised return comes to 6.56 per cent as against PO MIS’ 7.87 per cent (which is assured) and LIC Jeevan Akshay’s 7.34 per cent. The annuity proceeds are taxable in the hands of the investor.
| Table: Met MIP against Other Options | ||||
| Met MIP(in Rs) | PPF + PO’s MIS(in Rs) | MONTHLY INCOMES | PPF + LIC Jeevan Akshay (in Rs) | |
| Year 1 | -35,541 | -33,190 | PPF investment of Rs 33,190 per year for a period of 10 years will grow to Rs 4.81 lakh | -33,190 |
| Year 2 | -35,541 | -33,190 | -33,190 | |
| Year 3 | -35,541 | -33,190 | -33,190 | |
| … | … | … | … | |
| Year 8 | -35,541 | -33,190 | -33,190 | |
| Year 9 | -35,541 | -33,190 | -33,190 | |
| Year 10 | -35,541 | -33,190 | -33,190 | |
| Year 11 | 30,000 | 34,6201 | Rs 2500 p.m from MET guaranteed monthly income, Rs 2,885 p.m.from PPF + PO MIS, Rs 2805 p.m from PPF +LIC Jeevan Akshay | 33,670 |
| Year 12 | 30,000 | 34,620 | PO’s MIS investment | 33,670 |
| … | … | … | … | |
| Year 17 | 30,000 | 36,3492 | Rs 2500 p.m from MET guaranteed monthly income, Rs 3,029 p.m. from PPF + PO MIS, Rs 2805 p.m from PPF +LIC Jeevan Akshay | 33,670 |
| Year 20 | 30,000 | 36,349.16 | Reinvested in Post Office’s MIS investment | 33,670 |
| Year 21 | 30,000 | 36,349.16 | 33,670 | |
| Year 22 | 30,000 | 38,1673 | Rs 2500 p.m from MET guaranteed monthly income, Rs 3,180 p.m. from PPF + PO MIS, Rs 2805 p.m from PPF +LIC Jeevan Akshay | 33,670 |
| … | … | … | Reinvested in Post Office’s MIS investment | … |
| Year 25 | 30,000 | 38,166.62 | 33,670 | |
| Amount Returned at year 25 | 5,19,992* | 5,30,092 | 4,80,809 | |
| Return | 6.56% | 7.87% | 7.34%** | |
| Figures in -ve denote outflow and +ve denotes inflow
1. PPF corpus of Rs 4.81 lakh will give a monthly income of Rs 2,885 or an annual income of Rs 34,620; 2. MIS proceeds along with 5% bonus, i.e., Rs 5.05 lakh is again invested in PO’s MIS, which gives a monthly income of Rs 3,029 or Rs 36,349 per year; 3. Again, the MIS proceeds along with bonus, i.e., Rs 5.3 lakh is invested in PO’s MIS, which gives a monthly income of Rs 3,181 or Rs 38,167 per year. *The bonus amount of Rs 5,19,992 by MetLife at the end of term is not assured and will be given at the discretion of the company. ** The return will be little more as the plan LIC Jeevan Akshay VI assures an additional monthly annuity for an investment of more than Rs 1.5 lakh. |
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Tax benefits
Met Monthly Income Plan provides a tax benefit, of up to Rs 1 lakh on the total premium paid, under Section 80C of the Income Tax Act.
Things to look into
The plan talks about simple reversionary bonuses and a terminal bonus, which are not guaranteed; they will be applicable as and when declared by the company.
Recommendations
- Met Monthly Income Plan is a one-of-its-kind plan that offers MIP facility along with insurance cover.
- It is ideal for investors with no retirement plans whatsoever.
- Investors must have a premium payment term of at least 5 or 10 years.
- One can avail tax benefits under Section 80C on the premium paid per year.
How to invest in the plan?
Investors can buy the plan directly from any of the MetLife branches in India or its bank partners or through MetLife insurance advisors.
Summing it up
Met Monthly Income Plan is a unique product, which offers a combination of regular monthly income and insurance cover. However, the simple reversionary bonuses and the terminal bonus declared under this scheme are not guaranteed. If we take the bonuses out of it, the scheme gives a compounded annualised return of 1.92 per cent, which is minuscule compared to other MIP/MIS schemes generating a return of 7.5-8 per cent minus insurance cover. It is also an expensive product considering that for a monthly income of Rs 30,000 for 15 years, an individual aged 50 years needs to pay Rs 4.61 lakh per annum for 10 years. Thus, the plan is recommended for those who cannot manage the insurance cum investment part as illustrated above.
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Youhave missed a vital information-Eligibility criterian i.e Min/Max age at entry, or any other condition for entry/??
monthly return plans
@Madan Mathur Post updated with the information
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Good content but the comparision chart could have been a little more eloborate
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