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Originally Posted by monkeybreath
To be honest i would put it in a high intest savings account, and save it towards the deposit on your first house. After all, your not going to need a pension until you are at 65 (or sooner possible) but you will probably want to buy a house before then!
I put money every month into a 120day notice account with the Bradford and Bingley, and it is surpising how quickly it builds up.
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However pensions, having a large stockmarket element, grow much quicker.
At the moment "high interest" accounts are pretty much of a joke. For instance the best one available at the moment according to
http://www.moneyfacts.co.uk is 5.25% gross from the "Universal Building Society", but that's really not great. (I'd check what rate you're getting from the B&B, if it's the account I think it is, you may only be getting 4.25%)
If you're looking to invest for the longer term (around 5 years at least) then the stock market is the only way to go. Yes, it can go down as well as up, I've currently got a PEP that I opened with £3000 when PEPs were being withdrawn and the market was over 6,000 but it's currently only worth about £2000, but I know it's a long term investment.
Because of that I've also got a Shares ISA that I opened with £1,000 when the market dropped below 3,500 and it's now worth £1,285 ie it's gone up 28.5% in the past year, much better than any savings account! I'm also "drip feeding" £25 a month into it, so the value is steadily ticking up and at a much better rate than 5%!