The Financial Sector Conduct Authority has resolved the conflict over the date from which interest on unpaid retirement fund contributions must be calculated. Interest must be calculated from the first day of the month following the end of the month in respect of which the contributions were payable.
The Authority announced its decision on the calculation of late-payment interest (LPI) in Communication 6 of 2025 (RF), which it published on 6 April.
The announcement puts an end to the conflict over how section 13A(7) read with section 13A(3)(a) of the Pension Funds Act (PFA) should be interpreted and applied.
Section 13A(7) states:
“Interest at a rate as prescribed shall be payable from the first day following the expiration of the period in respect of which such amounts were payable on–
(a) the amount of any contribution not transmitted into a fund’s bank account before the expiration of the period prescribed therefor by sub-section (3)(a)(i);
(b) the amount of any contribution not received–
(i) by a fund before the expiration of the period prescribed therefor by sub-section (3)(a)(ii); or
(ii) in the circumstances contemplated in sub-section (3)(a)(iii), by the insurer concerned before the expiration of the period prescribed therefor by that sub-section;”
Regulation 33(7) of the Regulations to the PFA also dealt with LPI:
“Compound interest on late payments or unpaid amounts and values shall be calculated for the period from the first day of the month following the expiration of the period in respect of which the relevant amounts or values are payable or transferable until the date of receipt by the fund at the rate prescribed from time to time by the Minister under section 13A(7) of the Act by notice in the Gazette. Such interest shall constitute investment income for the fund and shall be payable to the fund by no later than the end of the second month following the month in respect of which the amount is received or the value transferred, as the case may be.”
Regulation 33 was repealed in January 2023 and replaced by Conduct Standard 1 of 2022 (RF).
Section 5(1) of the Conduct Standard states the following about interest on late payments:
“For purposes of section 13A(7) of the Act, compound interest on late payments or unpaid amounts –
(a) must be calculated from the first day following the expiration of the period in respect of which such amounts were payable until the date of receipt by the fund; and
(b) is prescribed to be the prime rate plus 2%.”
‘From the eighth day’
After issuing the Conduct Standard, the FSCA received requests from the retirement industry for clarification on the calculation of LPI, specifically in relation to the date from which LPI starts running.
This resulted in the Authority issuing Communication 15 of 2023 (RF) in May 2023.
The Communication states that LPI starts running on the eighth day – in other words, the day after the lapsing of the seven days following the end of the month in respect of which contributions were payable.
The FSCA was of the view that the period referred to in section 13A(7) was a month and seven days. Therefore, the first day on which LPI starts to run is the eighth day of the next month.
Not everyone agreed with this interpretation, so the FSCA obtained independent advice from Senior Counsel, who confirmed the Authority’s interpretation.
But the Office of the Pension Funds Adjudicator (OPFA), supported by the Batesta Council of Retirement Funds, held to a contrary interpretation.
Based on the legal advice it obtained, the OPFA said LPI must be calculated from the first day – not the eighth day – of the month following the expiry of the period in respect of which contributions were payable.
Authority changes its mind
The FSCA sought to resolve the matter by seeking advice from another Senior Counsel, who was provided with the reasoning behind the differing views expressed to the FSCA and the OPFA.
After reflecting on this legal advice, the Authority has changed its mind and now agrees with the OPFA that LPI must be calculated from the first day of the month following the end of the month in respect of which the contributions were payable.
“A contribution in respect of a month is payable within the first seven days of the next month; and should it not be so paid, the defaulting payer is liable for interest at the prescribed rate both retrospectively for that seven-day period and prospectively until the contribution is paid.”
The Authority has withdrawn Communication 15 of 2023.
The FSCA said it has asked National Treasury to consider amending the relevant statutory provisions to provide explicitly for the date from which LPI should be calculated (the first day following the end of the month in respect of which the contributions were payable).
