Does My Pension Count Towards Care Fees?

The short answer is yes: your pension does count towards care fees, but exactly how depends on whether you are drawing it and where your care is provided. The care means test, formally the financial assessment, looks at two things: your income and your capital. Pensions can fall into either, and getting the distinction right can change the bill significantly.

This matters because care is means-tested, not free. In England, if your assessable capital is above £23,250 you pay the full cost yourself; below £14,250 your capital is ignored and only income is counted; and between the two you contribute on a sliding scale (a “tariff income” of £1 a week for every £250 of capital). Understanding where your pension sits in that framework is central to the wider later-life care picture.

Income versus capital

The core rule is simple once you see it. Pension income you receive is assessed as income and expected to contribute to your fees. A pension pot you have not yet touched is treated differently, and usually more kindly.

So an untouched pension pot is generally left out of the capital calculation while it stays invested. That is a meaningful difference from cash savings or ISAs, which count in full. But it is not a loophole: councils can consider what income you could reasonably choose to draw (this is sometimes called notional income) and the moment you take a tax-free lump sum or start drawdown, that money is assessed. Deliberately leaving a pot untouched purely to avoid charges, or spending it down quickly on non-essentials, can be treated as deliberate deprivation of assets and charged as though you still held it.

There is a practical wrinkle for people over State Pension age. Once you can access a pension, a council carrying out the financial assessment may look at the income you could draw from an undrawn defined-contribution pot, even if you have chosen not to. The exact treatment varies between councils and settings, which is one reason two people with identical savings can end up with different bills, and why it is worth checking your own council’s policy rather than assuming the national rule applies uniformly.

Care at home versus a care home

Where you receive care changes how much of your income is taken. In a care home, the assumption is that you no longer need to run a household, so nearly all your income, State Pension, private pensions and annuities, goes towards the fees, leaving only the Personal Expenses Allowance (£30.15 a week in 2026). For care in your own home, the council must leave you enough to live on, so it protects a larger “minimum income guarantee” and disregards certain disability benefits.

The couple dimension matters too. The means test assesses you as an individual, so only your income and your share of jointly held assets count. A pension in your spouse’s name is not directly assessed against your fees, which is one reason retirement and pension planning between partners can affect care outcomes years later, a theme we explore in our guide to how much you need to retire. Where one partner enters a care home while the other remains at home, half of a jointly held private pension can also be disregarded, and the family home is protected while a spouse still lives there, protections that can materially change the sums.

Because pensions can be counted as income or capital, and because drawing them affects both your care bill and your inheritance tax position, the right approach is rarely obvious. This is information, not personal advice, and your circumstances matter. A vetted, FCA-regulated adviser, matched free through Vetted Wealth, can model how drawing, or not drawing, your pension changes what you keep.

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