Financial Makeover: Army skills build a thriving firm but financial defence must be thorough

Name: Chris Pugh Occupation: Defence And Communications Consultant

Two and a half years ago, life looked a lot more risky for Chris and Iris Pugh. Chris had left the Army as a major in 1997 after 26 years, to set up a company, using his experience in defence communications. With the company just getting off the ground, both had a cautious attitude to investments.

Chris is happy to report his business acumen is as finely honed as his Army skills. Today, his company, SCN, supplies consultancy and training services to the defence and telecommunications industries. GEC Marconi, BAe, ICL, Vodafone and Motorola are a few of the blue chip names that have used SCN's expertise, from their base in Blandford Forum, North Dorset. SCN'sestimated turnover pounds 2.4m this year, with 26 staff and eight consultants on freelance contracts.

The adviser: Wai Man Cheung of WMC Investment Advisers

The advice: Chris and Iris knew in 1997 they would need serious insurance to cover bills and other payments if Chris could not work. They took out a critical illness plan, which covers him in the event of serious ill health or death.

The cover is a staple for anyone thinking about setting up a business. Chris has insurance that could pay up to pounds 250,000, enough to clear the mortgage and provide Iris and their two children with a lump sum for financial security.

The Scottish Provident Self Assurance plan also protects Chris with comprehensive cover against permanent disability and Chris also set up a personal pension plan. He has conscientiously paid into Clerical Medical to supplement to his Army pension.

Now the company is successful, Chris needs to maximise the myriad of tax benefits on pensions. He can take what is, effectively, free cash from the Government for every penny set aside for retirement.

As his fortunes are so tied to the ebbs and flows of business, an executive pension scheme (EPP) will provide greater flexibility and tax benefits. He can shelter future profits from the taxman and even lend his company money for expansion from his pension pot. SCN needs to retain specialist staff, who can be expensive to replace. Chris has already set up a corporate pension plan for SCN staff. Standard Life is the pension provider that more independent financial advisers usefor themselves than any other.

The group personal pension plan from Standard Life is low cost, so charges will not eat into even the smallest contributions. It is flexible and, best of all, transparent. That means no additional unexpected charges and every pound invested works harder.

Personal health insurance and disability cover is also available, from Unum, the market leader. Rapid expansion of SCN has already led to two office moves, highly disruptive in such a technology-heavy environment. SCN has just bought a pounds 1m Georgian manor house, giving staff much more space and better training facilities.

Chris and Iris have been with the Halifax for their mortgage since he left the Army in 1997. We always recommend homebuyers review their mortgage every three years, minimum, because the market and rates can change dramatically in a short time.

FirstActive, the specialist lender, looks like a good choice. It offers flexible payments, so lump sums can substantially reduce the outstanding balance and the total amount of interest paid over time.

Overpaying by pounds 100 per month could slash their total mortgage bill by pounds 40,000. Chris and Iris can take a 3.25 per cent discount over six months, slashing their monthly bill in half. This simple move will save them a very handy pounds 360 per month.

Another simple but highly cost-effective move is find a mortgage that calculates interest every day. The Halifax and others have come in for some stiff criticism over their annual calculation policy, which can cost borrowers tens of thousands over the life of a mortgage.

As life is more financially secure, Chris and Iris need to think about their investments. Pensions are fine, but you cannot get hold of your cash until you retire. Both have some old personal equity plans which need reviewing.

PEPs' replacement, ISAs, are key to anyone's investments, and Chris and Iris should make maximum contributions. HSBC Asset Management's range of tracker and protected income products could serve them well.

Alternatively, Fidelity's Income Plus is doing well at the moment, averaging returns of 14 per cent per year over the last five years.

To make their nestegg grow even faster, Chris and Iris should be looking to Perpetual's range of funds in the UK, Far East and Europe, tipped to be soon one of the better-performing markets.

If you would like a financial makeover, write to: John Willcock, The Independent, 1 Canada Square, Canary Wharf, London E14 5DL. You must be prepared for your name and picture to appear in the paper