Bloomsbury Financial Planning

To achieve this he needs to pay off the £160,000 mortgage on his home and retain enough money to enable a monthly retirement spend of £3,000.

"The business I have is a consultancy specialising in financial software," he says. "I find the competitive nature of my business incredibly stressful and I'm looking forward to being able to retire and devote more time to my musical hobbies.

"My retirement is more about financial independence than stopping work, and I may well take a part-time job, possibly in the wine trade. I have a degree from the Wine and Spirit Education Trust so it would be great to use that at some point," he says.

In the past Peter has consulted financial advisers but his experiences suggest he may have been subject to mis-selling with advisers trying to sell him mortgage and pension schemes as well as Mediterranean villas.

Despite this, the financial advisers that FT Money consults agree that Peter has managed his finances well and that his goal of early retirement is ambitious but achievable.

Dan Dowding of Killik & Co says Peter's priority should be to review his pensionpolicy. "An executive pension is a tax-efficient savings scheme designed especially for directors and people who own their own businesses. They are money purchase schemes as opposed to defined benefit or final salary schemes, so the level of income depends on interest rates and the value of the fund at the time of retirement," he says.

The current annual contribution allowance is high at £215,000. The fund can grow free of tax, and on retirement Peter could withdraw a tax-free lump sum of 25 per cent. "It's a good vehicle for Peter to maximise his tax- efficient savings and I would recommend he increases his contribution to it now," says Dowding.

Peter could also investigate converting his pension into a self-invested personal pension (Sipp), says Jonathan Fry of Jonathan Fry & Co. This would give him flexibility and allow him to monitor his pension portfolio easily.

However Carolyn Corless of Bloomsbury Financial Planning approves of Peter's current pension plan. "Funding your pension via employer contributions is a sensible approach to follow as it shelters assets in a tax-advantaged environment. Pension contributions are one of the most tax-efficient methods of extracting cash from a limited company," she says.

However, under the new "pensions simplification" rules it will not be possible for Peter to access his pension benefits before the age of 55. "If Peter wants to retire at 45 he will need an investment vehicle to provide an income then," says Dowding.

As Peter has already built up a significant capital of £300,000 in his company, Corless believes the optimum way is to extract cash via a mixture of pension contributions and dividends. "It would appear that Peter plans to continue accumulating capital within his company," says Fry. "Holding capital in the company, where it is subject to Corporation Tax, is unlikely to provide a successful way of protecting the real value of the capital against inflation."

Fry recommends using a capital investment bond, or single premium bond, to invest the company's capital long term. An offshore version would allow Peter to take tax-efficient withdrawals of up to 5 per cent per year for up to 20 years.

For the rest of Peter's assets, Dowding stresses that Peter should work out his risk/return expectations. "At this stage in his life I think that stock market investments should form an important part of Peter's portfolio. He should start to de-risk his portfolio as he nears retirement, and as he intends to retire soon this must be done very carefully."

Corless estimates that Peter is more likely to be able to achieve financial independence at 48 than 45. She recommends that he take advantage of tax-free ISA allowances and divide his assets into three distinct notional elements: a contingency cash reserve of three to six months' expenditure for emergencies; a short-term portfolio of around £13,000 in cash and fixed-interest investments for anticipated expenditure; and a long-term portfolio split between equity and bonds.

To facilitate his plans to retire early, Peter should pay his mortgage off as quickly as possible, says Corless. She suggests Peter uses the cash currently held in his company to pay off the balance.

Peter has a £160,000 mortgage with Woolwich on his £250,000 home on which he pays 5.5 per cent interest. He offsets the mortgage with £85,000 of savings but this is not necessarily the best idea, say the advisers, as he could get a cheaper deal elsewhere.

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