Should I cash in my endowment policies?

Q I sought advice early last year about whether I should cash in my endowment policies since l had recently sold and redeemed the mortgage loan on a property to which they related.

The advice was that if l didn't need the money immediately I should hold on to the endowments which had ten years to run since l had "taken the pain" of the early charges and now I might as well "get the gain".

I accepted this advice, but in view of the recent even gloomier news about endowments, I wrote to the insurer to ask what the surrender value of the policies were about a year and a half later.

I found that the value had increased by about 1.5%, which is much less than l would have earned from a deposit account. Should l cash in the policies now?

HM

A The perceived wisdom has historically been that it is unwise to cash in endowment policies early.

However, this is now being questioned following the radical changes in the investment world. If interest rates and inflation remain low, investment returns are likely to remain modest even if the share market recovers, so terminal bonuses are also likely to be poor - especially as the high charges represent a larger percentage of the total returns.

I, therefore, believe that nowadays there is a strong case for surrendering endowment polices and selling them on the second hand market, because they are poor savings vehicles and the premium payments, plus the lump sum, can earn more elsewhere. In fact that is exactly what I am personally doing.