Should I discontinue my endowment policy?

Q I am expecting my first baby so am trying to save the pennies and cancel any payments. I used to own a property but it was sold in 2001. I took out an endowment policy and am still paying ?80 monthly premium. Do you think it is best for me to continue the payments, or should l cash in the policy considering that l do not have the funds to continue? If so who do l contact to terminate the payment?

AD

A I have received a lot of questions in recent months about whether endowment policies should be discontinued. The perceived wisdom in the past was that an endowment policy should be held to maturity to gain the maximum terminal bonus, and advisers recommending surrender were liable to be censured.

However, attitudes have changed. The sharp fall in the share markets has underlined the fact that endowment policies generally are poor investments, primarily because of the high charges involved-not to mention the restrictions on early encashment. Whether or not you discontinue an endowment policy depends on individual circumstances, but endowments are fundamentally inefficient and expensive savings vehicles. Unfortunately at present there seems to be a very poor secondhand market because buyers know that bonuses are being cut to low levels and the companies will need a long time to build up reserves even if the share market does rally sharply. You are in a difficult position, since after four years the surrender value of your policy will be very low indeed because charges are taken at the front end. As you cannot afford it l would simply stop the payment of ?80 a month (cancel any direct debit) and inform the company accordingly. The policy may be made "paid up" but it will be virtually worthless. Sorry not to have been of more help.