Switching funds approaching retirement

nettymes

I have a personal pension pot worth approx £65K (still I hope!) from a previous job over 20 years ago. I am now in the local govt scheme so I haven't added to it. It's with the Prudential (ex Scottish Amicable) and as I am 60 in July, the retirement age of the plan, I have to decide what to do with it. I now realise I should have reviewed it over the years, maybe moved it somewhere else, but right now I'm just trying to learn enough to make better informed decisions in future!

I want to defer taking it for a year (at least) and in the meantime I have been considered switching funds in the plan. Currently approx half is in a Managed Fund and half in with-profits. I can only defer the with-profits for minimum 3 years so I have to switch at least this to another fund but the choice is limited. There's a Fixed Interest fund based on the M&G Gilt & Fixed Interest Income fund and a Cash fund. The Fixed Interest fund has been doing well but I read that gilts are expected to drop in value any time soon, but the cash fund has returned 0% since July 2010! Apart from Property all the other funds are in equities.

I was planning to sort it all the month before my birthday as that's when I can switch out of the with-profits, but the Managed fund is falling so I think I should switch out of that now if I can. But it feels wrong to switch everything into Cash which will be eroded by inflation from now until I decide to retire. Any thoughts?