Care costs

The money you take from or leave in your pension pot could affect how much you may have to pay towards care costs later in life.

Care can include help at home with things like washing, dressing, getting out and about, staying in touch with friends and family or moving into a care home. This is known as social care and local councils are responsible for it.

How care is paid for

Social care isn’t free. You might have to pay some or all of the cost of your care.

Your local council will work out how much you can afford to contribute towards your care costs. They will look at:

• any money in or taken from your pension pot – either as cash or income
• any other income you have
• your assets (e.g. savings and investments)

How your pension pot is assessed

Leaving your pot untouched

If you leave money in a pension pot your local council won’t count this when they work out how much you can afford to pay for care. Once you reach Pension Credit qualifying age your local council will assume you’re receiving an income from your pension.

If you don’t take an income, they’ll check how much you’d receive if you bought an annuity and use this amount when they work out your income.

Adjustable income

If you take an adjustable income they’ll look at how much you’d get if you bought an annuity, and depending on how much you withdraw from your pot, they may class it as capital or income in the assessment of your benefits.

Taking cash from your pension

If you take cash in chunks or your whole pot in one go and put it into savings or invest it, your local council will treat it as an asset and include it when they work out what you can afford to pay.

If you deliberately spend or give away money (including tax-free cash) from your pension pot to get or increase help with care costs, your local council may assess your finances again and treat you as still having that money.