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The returns on my endowment policy are rather small - should I cancel it?,,,

Last year, the value rose by only £309 for an outlay of £496. If I cancelled, what could I expect? Mrs M.G., Derbyshire

Dilemma: In October 1996, I took a mortgage endowment with the Woolwich, paying £41.35 per month. I have paid in £7,443 and the value is only £7,601...

Money Mail's financial agony uncle Tony Hazell says: One vital aspect of an endowment, because it includes life insurance, is your age. After speaking to your husband, I have discovered you are 45, that he is 20 years older than you, that you have no dependent children and your mortgage is paid off.

You have a secure job with a good pension. It is therefore reasonable to question why you would need the life insurance provided by this endowment.

  More... ASK TONY: The catalogue of woes that's cost me £1,700

You have what is known as a unit-linked plan, which basically means the value of the investment will go up and down as share prices rise and fall. When I inquired, it was worth £7,286.77.

The policy also includes critical illness cover for £24,300, which would pay out if you contracted one of a number of ‘dread diseases’.

The final decision is yours, but you are right in thinking there are alternatives that might suit you better.

You would, for instance, have got a better return from a decent cash Isa than you did from this endowment over the past year. Although interest rates are low, there is no risk and you could make just over 3.05 per cent with the AA or 2.85 per cent with Virgin.

Both offer easy access to your money.

Another option is to make it ‘paid up’. In this case, the money would remain invested, but you would not have to pay any more. The drawback is that the cost of your life and critical illness insurance would be deducted from the value of your investment.

This could well result in the investment gradually dwindling to nothing over the years.

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