The Financial Services Compensation Scheme (FSCS) has boosted the Temporary High Balance (THB) protection for deposits of up to £1m from six to 12 months for deposit-taker failures which take place from Thursday.

The Prudential Regulation Authority (PRA) has temporarily extended FSCS coverage for THBs in response to the impact of Covid-19 on the residential property and investment markets.

The FSCS says the move recognises that some people have reduced access to banking services at present.

Due to the impact of Covid-19 there may be more depositors with large balances who need longer protection, the FSCS says.

THBs are short-term deposits related to major life events, including money deposited in preparation for buying a main residence; money paid in relation to a divorce or dissolution of a civil partnership; a redundancy payout and compensation in respect of a person's death.

For deposit-taker failures after 6 August 2020, the extension will apply to both new and existing THBs.

Money deposited into an account with an authorised UK bank, building society or credit union in February 2020, with the six-month THB coverage due to end in August 2020, will now be protected until February 2021.

For a qualifying THB deposited in September 2020, coverage would run until September 2021, as opposed to March 2021.

Caroline Rainbird, FSCS chief executive, said, "The Coronavirus pandemic has been very worrying for everyone, and people are understandably concerned about the possibility of losing their temporary high balance should their deposit taker fail. The temporary extension of FSCS's protection from six to 12 months will do much to reassure them should the worst happen during these uncertain times."

The THB extension only applies to deposit-taker failures that occur after 6 August, when the extension comes into force.

Coverage will revert to six months for a THB made from 1 February 2021.

 Further information on THBs can be found on the FSCS website at fscs.org.uk/how-we-work/temporary-high-balances/