The FCA has warmly welcomed a significant industry recommendation aimed at accelerating fund settlement times. This comes as the Investment Association (IA), Personal Investment Management and Financial Advice Association (PIMFA), and Alternative Investment Management Association (AIMA) have jointly urged firms to transition to T+2 settlement for funds on or before October 11, 2027.

This concerted push is a strategic move to align fund settlements more closely with the broader global trend towards quicker settlement in capital markets. Notably, the UK, EU, and Switzerland are planning to move securities trades to T+1 by the same October 2027 deadline, following the landmark shift in the US to T+1 for securities trading in May 2024.

The recommendation from the three leading trade associations is a direct response to the government’s Accelerated Settlement Taskforce (AST) report, which identified T+2 as the optimal settlement period for funds. This cycle offers crucial cash management flexibility while mitigating a potential funding gap that could arise with products settling at T+1, said the report. The general impetus for faster settlement cycles across global capital markets is driven by the desire to improve operational efficiencies, increase liquidity for investors, and reduce manual processing demands.

“This is an important step towards greater global alignment on settlement cycles.”

Liz Field, Chief Executive, Personal Investment Management and Financial Advice Association

Chris Cummings, CEO of the Investment Association, commented: “As a critical bridge between investors and capital markets, it’s extremely important that the funds industry keeps pace with broader changes in financial services infrastructure.

“We encourage firms, their service providers and the wider distribution chain to kickstart preparations for T+2, focusing on the delivery date to ensure a smooth transition.”

Liz Field, Chief Executive of the Personal Investment Management and Financial Advice Association, underscored the benefits for clients: “PIMFA and its members support the reduction of the settlement cycle for UK funds transactions to T+2. This is an important step towards greater global alignment on settlement cycles.”

Jack Inglis, CEO of the Alternative Investment Management Association, also gave strong support: “AIMA is actively supporting firms with the global shift towards shorter securities settlement cycles. This transition will contribute to a more efficient and competitive financial ecosystem, benefiting market participants and investors alike.”

Government backing

The recommendation has received strong backing from the government’s side. Andrew Douglas, Chair of the Government’s Accelerated Settlement Taskforce, stated: “I wholeheartedly welcome and support this recommendation from IA, PIMFA and AIMA. It fully aligns with the industry’s February 2025 T+1 Implementation plan, specifically ENV 11, both on content and the required deadline. I would encourage all participants to adopt it as part of their preparation for the implementation of UK T+1 on 11th October 2027.”

Currently, there is no standard settlement timing for UK funds, with practices ranging from T0 to T+4, though T+3 is the most common. The proposed T+2 standard aims to provide a consistent and more efficient framework across the industry. The IA has also provided its members with a list of considerations to help fund managers prepare for this market change, providing a framework for coordinated action.

This collaborative effort between industry bodies, working closely with the AST and the FCA, demonstrates a clear commitment to modernising the UK’s financial infrastructure, enhancing its global competitiveness, and ultimately benefiting investors through increased efficiency and reduced risk.