It sounds as though you invested into a protected stockmarket bond, where the return you get depends on how the stockmarket performs. These products have the potential to give you a better return than savings accounts, although if the stockmarket performs badly you typically just get your money back at the end of the term. That seems to be what has happened here.
You are correct that, in hindsight, you would have been better off using the money to reduce your mortgage. Unfortunately, we aren't able to make these decisions with the benefit of hindsight. What you should do from here depends upon your circumstances, requirements and attitude to risk.
If you are prepared to risk losing money then you could consider investing in the stockmarket, or in another protected stockmarket bond, which will reward you if stockmarkets rise but also give you some protection if they don't.
However, based on your comments, it may be that you don't want to risk losing money or achieving no return. In that case you could look at cash savings, ideally in a cash ISA where all interest is tax-free, or paying off debt or some of your mortgage.