Spencer led the Red Rose outfit to three Six Nations titles in all, defeated world champions New Zealand on the occasion of her 50th cap and captained her side to a World Cup final on home soil - where the Black Ferns gained a 10-13 revenge in September.
Spencer, who plays her club rugby with Bristol, wants to continue her international career but believes the time is right for another play to step up to the top job.
"It was a tough decision and I don't mind saying that I was in tears when I told the coaches," said Spencer.
"I don't have a date set for my retirement but I can't say where I'll be for the next World Cup and I think it is right that the new captain has time to get used to the job before that World Cup.
"I think I can be better as a player and being captain takes up a lot of your time and I don't feel like I am finished with the game yet."
Spencer was part of the England team who were defeated 17-25 by New Zealand in the final of 2006 World Cup and took over the armband from Sue Day in November 2007.
Despite going on to lose a second successive world final to the reigning champions,
Spencer's greatest day as skipper also came against the Black Ferns in the 10-3 victory at Twickenham in November 2009.
"I have some great memories but it is hard to look past beating New Zealand at Twickenham on my 50th cap," added Spencer.
"I still have very mixed emotions about the World Cups, it was a great occasion but it was so hard to take losing like that and we were all devastated."