McCaw made the decision to pull out as a result of a knock to the head sustained in last week's victory over Ireland.
"This is precautionary," said All Blacks coach Graham Henry. "Richie is very close to fit, but we want to err on the side of caution."
McCaw, who has suffered problems with head injuries in the past, passed a medical test but Henry said: "I think this is a very mature decision by Richie. He has put the team first.
"He has a history and has been through this before so it's made it easier for him although this was a very difficult decision. There's no point him playing if he isn't 100 per cent.
"It comes down to the fact that Richie knows his own body and feels he's slightly off his best. He's an experienced player who wants to do the right thing for the team and himself."
New Zealand intend to assess McCaw's fitness on a day-to-day basis before deciding if he will return for the final game of their four-match autumn tour against Scotland at Murrayfield on November 26.
Henry added: "It's a great opportunity for Chris Masoe and he's looking forward to it. Chris has been kept in touch with the situation during the week.
"He was selected at a number seven for the tour so it isn't a problem for the team. He's a very explosive player and a devastating tackler."
New Zealand team to play England at Twickenham on Saturday:
M Muliaina (Auckland); D Howlett (Auckland), T Umaga (Wellington), A Mauger (Canterbury), S Sivivatu (Waikato); D Carter (Canterbury), B Kelleher (Waikato); T Woodcock (North Harbour), K Mealamu (Auckland), C Hayman (Otago), C Jack (Canterbury), A Williams (Auckland), J Collins (Wellington), C Masoe (Taranaki), R So'oialo (Wellington).
Replacements: A Hore (Taranaki), N Tialata (Wellington), J Eaton (Taranaki), M Tuialai'i (Canterbury), P Weepu (Wellington), J Rokocoko (Auckland), L MacDonald (Canterbury).