What is safeguarding, and how is it different from FSCS protection?

Safeguarding is a legal duty on FCA-authorised payment and electronic money firms to keep customers' money separate from the firm's own funds, so that it can be identified and returned if the firm collapses. It is not the same as FSCS protection: safeguarding pays no compensation, it simply ring-fences what is already yours. The practical difference shows up when a firm fails — with FSCS-protected deposits you are usually repaid automatically within about seven days, while with safeguarded funds you wait for an administrator, and the amount you get back can be reduced by the costs of the administration.

What does safeguarding actually require a firm to do?

Two sets of rules impose it: regulation 23 of the Payment Services Regulations 2017 for authorised payment institutions, and regulation 20 of the Electronic Money Regulations 2011 for electronic money institutions. Both allow the firm to choose between two broad methods, or to mix them:

• Segregation. The firm keeps your money apart from its own and places it either in a separate account with an authorised credit institution or the Bank of England, or in secure liquid assets approved by the FCA and held with an authorised custodian. The account must be designated so that it is visible on its face as a safeguarding account.
• Insurance or guarantee. The firm covers the funds with an insurance policy or a comparable guarantee from an authorised insurer or credit institution, with the proceeds payable into a separate designated account if the firm becomes insolvent.

Notice what is absent from both options: any promise that someone else will make up a shortfall. Safeguarding is a plumbing requirement about where money sits, not a backstop.

How is safeguarding different from FSCS protection?

	Safeguarding	FSCS deposit protection
Who it applies to	Authorised payment institutions and electronic money institutions	Banks, building societies and credit unions authorised to accept deposits
What it is	A duty to hold your money separately from the firm's own	A statutory compensation scheme
Who pays you if the firm fails	An administrator, out of the ring-fenced pool of your own money	The FSCS, out of an industry-funded scheme
Typical speed	Weeks to months, depending on the administration	Usually automatic, within about seven days (FSCS)
Can you get back less than your balance?	Yes — costs can be deducted from the pool	Not below the limit; the limit itself is the cap
Limit	No fixed limit; you are entitled to your share of the pool	£120,000 per eligible person per authorised firm since 1 December 2025

The single most useful way to hold the distinction in your head: FSCS protection has a ceiling but no leakage, while safeguarding has no ceiling but possible leakage. A £200,000 e-money balance is not capped at £120,000 — but nor is any part of it guaranteed to come back.

If you want the detail on the FSCS side, see how much of my money is FSCS protected if my bank fails.

Which firms safeguard rather than being FSCS protected?

Firms that hold your money without a deposit-taking licence: electronic money institutions and authorised payment institutions. That covers a lot of what people think of as banking — prepaid and multi-currency accounts, money transfer services, some business accounts, and app-based providers that have not (or not yet) obtained a UK banking licence.

The trap is that a single brand can sit across two legal entities, one a bank and one an e-money institution, with different protection on each. That is exactly the situation described in is money held in Revolut FSCS protected in the UK, where the answer turns entirely on which entity holds the balance.

To check your own provider, look up its permissions on the FCA's Financial Services Register and read the protection wording in its terms. One further wrinkle: the FCA notes that small payment institutions are not required to safeguard at all, so with one of those you should ask the firm what protection exists.

What happens to my money if a safeguarded firm fails?

Payment and e-money firms have their own insolvency route — a special administration regime created by the Payment and Electronic Money Institution Insolvency Regulations 2021. The administrator constitutes an asset pool from the safeguarded funds and distributes it to the customers entitled to it, ahead of the firm's general creditors.

That priority is genuinely valuable — you are not queuing behind landlords and trade suppliers. But two things can still go wrong for you. Distribution takes as long as it takes to reconcile the firm's records, so there is no seven-day expectation. And where the firm's own assets are insufficient to meet the costs of the administration, those costs can come out of the asset pool itself. The FCA puts it plainly in its consumer guidance: you should get most of your money back, but it may take time and may not be the full amount.

Does safeguarding cover me if I lose money to fraud or a bad payment?

No — it is the wrong tool for that question. Safeguarding only deals with the firm failing. Losses from a scam are handled under the authorised push payment reimbursement rules instead, which is a separate regime with its own limit and its own exceptions; see will my bank refund me if I was tricked into sending money. And neither safeguarding nor the FSCS deposit limit protects the value of an asset: if something you hold falls in price, no protection scheme makes that good.

Is the safeguarding regime changing?

Yes. The FCA published its final rules in PS25/12 on 7 August 2025, tightening record-keeping, reconciliation, reporting and monitoring, with the aim of reducing shortfalls and getting money back to customers faster. That interim "supplementary regime" comes into force on 7 May 2026. A later end-state regime is planned to replace the safeguarding provisions of the two sets of regulations with a client-assets style framework.

The direction of travel is towards fewer shortfalls — but it does not turn safeguarding into a compensation scheme, and the structural difference from FSCS protection remains.

In short

Safeguarding segregates your money; the FSCS compensates you. If a firm holding your money is not a deposit-taker, expect a slower and less certain return in a failure, even though the money is legally yours. A practical approach: check on the FCA Register whether each provider you use is a bank or an e-money institution, keep balances you cannot afford to have tied up for months in an FSCS-protected deposit account, and treat e-money accounts as tools for spending and transferring rather than for storing savings. Rules and firm permissions change, so re-check before you rely on either protection.