Associations issue recommendation on T+2 fund settlement

Firms have been encouraged to alter their fund settlement timings to T+2 by 11 October 2027, in preparation for plans in the UK, EU, and Switzerland to change the settlement period for transactions in listed stocks and bonds to T+1 by the same date.

The Investment Association (IA), Personal Investment Management and Financial Advice Association (PIMFA) and Alternative Investment Management Association (AIMA) have collaborated to issue a recommendation urging firms, their service providers, and the wider distribution chain to begin preparations for T+2.

This was backed by the Financial Conduct Authority, which said faster settlement would make markets more efficient, improve liquidity, and support the growth and
competitiveness of the UK.

It stated that fund managers should determine what is required to move to a T+2 settlement cycle in October 2027 and plan early to deliver this transition.

The associations said there was a general trend towards quicker settlement in global capital markets, seeking to improve operational efficiencies, increase liquidity for investors, and reduce manual processing demand.

A recent report from the government’s Accelerated Settlement Taskforce (AST) concluded that T+2 was optimal for fund settlement, to provide cash management flexibility whilst minimising a potential funding gap with products settling at T+1.

Funds typically look to apply a one-day settlement lag to provide some cash management flexibility in investing in various global securities and products, whilst minimising a potential funding gap and associated costs.

There is currently no standard settlement timing for UK funds, with a range in place between T0 and T+4, and the most common timing at T+3.

“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,” stated the Investment Association CEO, Chris Cummings.

“The move to T+2 for funds will encourage greater global alignment on settlement cycles, enabling better services for investors, fostering a more robust financial ecosystem and improving the competitiveness of UK and European funds. 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.”

PIMFA chief executive, Liz Field, added: “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, which will foster a more robust financial ecosystem, drive economic growth, increase investor confidence and improve the competitiveness of UK markets.”

AST chair, Andrew Douglas, welcomed the recommendation from the associations, stating that it fully aligned with the industry’s February 2025 T+1 implementation plan, specifically ENV 11.

“AIMA welcomes the UK AST’s roadmap for transitioning to a T+1 securities settlement cycle by 11 October 2027,” commented AIMA CEO, Jack Inglis.

“We are committed to working with the industry to implement the necessary changes to ensure a smooth transition.

“In line with the AST’s recommendations, 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.”

The IA has separately provided its members with a list of considerations for fund managers, providing a framework for co-ordinated action by firms.



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