How your pensions can affect social care costs

The money you take from, or leave in, your pension pot might affect how much you might 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’ll look at:

  • any money in, or taken from, your pension pot – either as cash or income
  • any other income you have
  • your assets (such as 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’ve reached your State Pension 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 get if you bought a guaranteed income for life (an annuity). They would then use this amount when they work out your income.

Flexible retirement income

Are you using your pension flexibly by keeping it invested and taking an income from it? Then your local council will look at how much you’d get if you bought a guaranteed income for life (an annuity).

Depending on how much you withdraw from your pot, they might class it as capital or income in the assessment of your benefits.

Taking your pension as a number of lump sums

If you take lump sums 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 might assess your finances again. They might treat you as still having that money.

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Looking for us? Now, we’re MoneyHelper

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Whatever your circumstances or plans, move forward with MoneyHelper.

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