Why building and maintaining a cash reserve is crucial for hospice sustainability

Hospices play a vital role in providing end-of-life care across the UK, offering comfort and kindness in dark and difficult times. 

However, a sector built on care and compassion has had every right to feel neglected in recent times. A range of funding cuts, job losses, and financial pressures has left many hospices on the brink of crisis.

Thankfully, the UK government stepped in with a short-term reprieve of £75m in funding (July 2025) – added to the £25m pledged in February 2025 – taking the total to £100m (as promised in December 2024). This has lifted tensions, but it’s not a long-term solution. 

In this blog post, we recap the challenges faced by the hospice sector and the government’s funding pledge, and we explain why building and maintaining an easy-to-access cash reserve can make all the difference going forward. 

The state of play: 3 key challenges faced by the hospice sector

Over the past few years, three clear challenges have emerged and converged for the hospice sector. Let’s take a look at each of them in a little more detail: 

1. Budget shortfalls and service reductions

As with the NHS, hospice care is free at the point of use. However, unlike the national health service, it’s not fully state-funded. Only around one-third of hospice funding comes from the government, with the rest (over £1bn a year) raised by hospices themselves via shops, charitable donations, fundraising efforts, and money pledged in wills. 

Recently, the gap between funding received and the actual cost of care has widened significantly. This led to a reported £77m funding deficit, with charity Hospice UK highlighting that budget shortfalls have resulted in service reductions across many hospices. 

2. Rising NI contributions 

Employer National Insurance contributions (NICs) were raised from 13.8% to 15% in the Autumn 2024 budget. This brought huge concern at the time, with industry experts warning that the additional financial pressures triggered by NI rises could cost the sector around £30m a year. 

3. The cost-of-living crisis and increasing operating costs

Demand for specialist palliative and end-of-life care is increasing, mainly due to people living longer and the rise of complex, long-term conditions like dementia. While this increase in demand would usually be enough to add pressure to the hospice sector, it’s happening against the backdrop of escalating staffing and supply costs and soaring energy prices. This has put a strain on hospice balance sheets and cash reserves.

Government support: A welcome, but short-term, relief

If the above challenges had hospice leaders rightly worried, the news of additional funding from the UK government brought some relief. 

The July 2025 pledge of £75m for hospices across England is aimed towards improving and upgrading facilities, with more than 170 institutions set to benefit. 

However, while the announcement was a welcome one and has helped ease immediate pressures, hospices must remain cautious. The one-off nature of the funding means this is a short-term buffer, not a long-term fix. 

With this in mind, hospice leaders need to continue advocating for more (and more sustainable) statutory funding, while also diversifying income and strengthening cash reserves.

Why an easily accessible cash reserve matters now more than ever for hospices

There are short, medium, and long-term benefits to building and maintaining a healthy cash reserve for hospices. These include: 

Supporting day-to-day operations

A cash reserve allows hospices to cover essential day-to-day costs such as payroll, rent, utilities, drugs and medicines, and clinical supplies. By maintaining readily available funds, hospices can avoid service disruptions, ensuring patients and families continue to receive uninterrupted, compassionate care even during times of financial uncertainty.

Providing a safety net for emergencies

A strong cash reserve gives hospices a vital safety net should the unexpected happen, such as urgent repairs, a surge in admissions, a surprise bill, or sudden staffing gaps. By having funds to hand, organisations can respond quickly without compromising the quality or continuity of patient care. 

Enabling strategic planning and growth

Finally, a cash reserve can help hospices plan confidently for the future. With an easy-to-access pot of cash set aside, they can invest in new services, pursue new initiatives, pilot innovative care models, and strengthen long-term sustainability without financial hesitation.

5 practical ways to build and protect hospice cash reserves

As we’ve discovered above, building and protecting cash reserves is vital for hospices to ensure financial stability, safeguard patient care, and remain resilient against rising costs and unexpected challenges. But how do you go about it? 

Here are five practical ideas to help you get started: 

1. Conduct regular cash flow forecasts: Regular forecasting can help you anticipate and identify peaks and dips in income and expenses, like seasonal fundraising trends, grant cycles, and rising operational costs. This projected view can put your hospice on the front foot, allowing you to act early to prevent shortfalls and maintain financial stability. 

2. Review spending periodically: By undertaking a quarterly or biannual review of your spending, you can reveal savings opportunities without compromising the quality of care you’re providing. For example, you may be able to renegotiate with a supplier or switch to an alternative to reduce costs.

3. Strengthen your legacy giving message: Encouraging families and supporters to leave a gift in their will can provide hospices with reliable, long-term funding. By raising awareness of this option and offering clear guidance for how to do it, you can secure valuable funds that can help build cash reserves both now and in the future. 

4. Develop a policy for minimum cash reserve levels: It’s not enough to simply state that your hospice needs a healthy cash reserve; you need to put a number on it. Define a clear internal policy that outlines the minimum level required to safeguard operations. This will act as a guide for financial decision-making and ensure hospice leadership balances short-term investment with long-term sustainability.
   
   This guide from the Charity Commission for England and Wales sets out the importance of having a reserves policy, how to develop one, and how to report it in a charity’s annual report.

5. Use the right savings platform: Protecting your cash reserves is every bit as important as growing them. The Insignis savings platform is one trusted option that can help you do both. We help hospices and charities maximise returns on their cash by spreading funds across a wide range of accounts. By switching and saving with competitive interest rates, you can ensure your money works harder, while still remaining accessible for when you need it most.

How Insignis helps hospices to protect and grow their cash reserves

Despite the recent funding news, there remains a need for hospices to develop financial resilience amidst uncertainty. 

Building a cash reserve for both daily operations and long-term sustainability is a crucial step many organisations must take to protect the vital care they provide.

With Insignis, all it takes is a single application, and your hospice can access a wide selection of competitive savings accounts from our carefully chosen banks and building societies. Protect eligible funds, generate interest on your savings, and grow your cash reserves without adding to your administrative workload. 

‍Download our not-for-profit brochure to find out more about how Insignis can help you.

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