I have three grandchildren, aged 12, eight and six. When each grandchild was born, I took out an insurance-based investment plan that buys units in various sectors. The premium was £50 per month for 25 years.

I recently saw a list of ten or more insurance companies showing the anticipated return on policies with a premium of £50 per month for 25 years. The company with which my grandchildren’s policies are invested was in the bottom three, and it has regularly been in that position.

I was originally attracted to these policies because of their built-in flexibility. In effect, there were five £10 policies and each one could be cashed in without affecting the other four. Now I no longer consider that flexibility as being as important as the return, since it would be possible to cover flexibility in other ways.

Is it sensible to make the policies paid up and transfer to another company? And would it be possible to use the money raised in this way to buy additional years?

Mr F Cocks, Bristol

Jonathan Davis replies:

It appears that you purchased endowment plans without extra life assurance (the type that used to be the norm for covering a mortgage and saving to pay it back eventually). Endowments are not usually efficient for saving long term. Often the charges are high and the fund choices highly restricted. And you cannot buy additional years like occupational pensions.

There are essentially two types of funds that you could have opted for – with profits or funds based on other investments, such as equities or commercial property. If you opted for the former, then these funds (on average 40 per cent equities, 40 per cent Government and corporate bonds, 15 per cent property and the remainder in cash) may not perform particularly well over the next 13 to 19 years.

These asset classes will be hit increasingly by rising global interest rates. Thus – solely on the information you have provided – I would stop saving into them and redirect your funds to more efficient arrangements and asset classes (i.e. investment funds) with a greater opportunity for growth.