The Journal

Beneath those shock horror reports of grim household debts, wobbly house prices, falling high street sales and private pension nightmares, savers are salting away substantial sums in building society coffers.

Latest figures from the Building Societies Association (BSA) show a net inflow of nearly £800m in May, 60% up on May 2004.

April savings soared too (society net inflows topped £1.4bn), presumably reflecting fears about the economy among older people who tend to hold spare cash.

Although money in tax-free ISAs earns 5%-plus, many accounts produce a mundane return.

But where can you sensibly invest a lump sum these days without worries?

Trading up to a better home is a hassle in a weak market, home extensions are tricky and London shares could have peaked for the year.

One answer might be a home in the sun, easily accessible by "no frills" airlines. It might be tempting if pension rules make us stay longer in work: why work to 70 when the alternative is a comfy pad in Marbella?

Parador Properties, a leading UK overseas property company, offers an interest-only Euro mortgage from Lloyds TSB's Own Overseas Service.

Costing 3.35%, it allows four people to contribute towards repayments for the 25-year life of the loan.

Parador MD Jack Hamilton, says: "It is possible for four people to contribute £10,000 each and borrow in total another £32,000 to own a two-bedroomed apartment on a development in the Spanish countryside, near the Segura Valley in the Costa Blanca." Parador says the average property purchase by Britons in Spain is £120,000. But it sells from £60,000 in remoter parts of the Costa Blanca, and from £85,000 in Majorca.

A holiday hacienda in deepest Andalucia is a shrewd investment in a balanced portfolio.

As many as 750,000 British property owners are already sitting pretty in Spain, around 170,000 of them settled permanently.

British investors spend £12bn a year in Spain, and Moneyweek magazine predicts this will rise to £21bn by 2009.

ARC Fund Management claims to be first of its type to gain the approval of the Financial Services Authority (FSA) to invest in residential and commercial property in Spain, Germany, and Eastern Europe's emerging markets. Leading UK agents Savills is the fund valuer.

The new fund takes minimum deposits of £5,000. But with an initial charge of 6.5%, and subsequent annual management fees of 2.5%, it's hardly a scheme to deliver overnight profits.

Christopher Rowe, chief executive of ARC Fund Management, says: "Approval from the FSA provides peace of mind."

Intending to raise at least £3m from investors by mid-October, and perhaps £30m eventually, ARC will hold 20% in cash for investors keen to get out, 30% will go into properties and 50% in developments off-plan to earn a rapid profit.

* Parador (0800 083-8658 or www.paradorproperties.com); Prospectus from ARC Fund Management (0207 623-3345); Holiday Property Bond (01638 660066).