Thousands of public servants stand to earn substantial sums of money over the next four years through the proposed national meeting turn, a Government paper obtained by Barbados TODAY has claimed.
The money to come from the plan diverts between seven and 20 per cent of public servants’ paycheques into Government bonds through a compulsory scheme that is expected to be further explained to the country in the coming days, as Prime Minister Mia Mottley grapples with an estimated half-billion-dollar drop in revenue as a result of the COVID-19 emergency.
More immediately, $100 million of the savings is expected to be pumped into capital works projects in a bid to find temporary work for many of the thousands of private sector workers who were made redundant as a result of the shutdown.
The proposal, first described as ‘forced savings’, has sparked fierce national debate. Some have expressed doubt of any benefit to them while others have urged to give it a chance to work.
On Monday, retired trade unionist Sir Roy Trotman told Barbados TODAY: “It is something that should be explored. I don’t think we should start dumping stuff without thinking about it.”
While it is expected that every public worker who earns more than $36,000 per year will be compelled to join the scheme, any employee who is unable to afford the income drop will have an option to immediately cash in his or her forced savings.
Among the key features of the plan contained in the white paper:
. None of the 11,000 employees earning less than $36,000 per year will be enrolled in the scheme unless he or she approaches the Government and volunteers;
. Public officers earning between $36,000 and $50,000 will receive between seven per cent and ten per cent of their salary in bonds – the remainder as normal;
. Those earning between $50,000 and $100,000 will receive between 12 per cent and 15 per cent in bonds — the remainder as normal;
. Those earning over $100,000 per year will receive between 15 per cent and 20 per cent of their salary in bonds — the remainder will be paid as normal.
For those civil servants whose financial commitments require them to pay more of their salaries out each month than they now get in cash, Government has already put arrangements in place with a number of financial institutions, including credit unions, to accept the bonds in part or in whole from any public servants and pay them the full value, Barbados TODAY was told.
“This is possible,” a source explained, “because these bonds are extremely attractive. They will pay a five per cent interest, which is almost five per cent more than banks now pay on savings.
“What is even more important is that any public servant can set up a standing order so that each month his full bond or any agreed portion can be converted to cash. In essence, he is getting his full salary each month if that is his choice, just that Government will pay him, for example, 90 per cent in cash or cheque as usual, and a financial institution will pay him the remain on the bonds.
“He is absolutely no worse off, but if he decides to hold on for four years he is considerably better off.”
This means that an employee who, for example, has monthly bond deductions of $531.45 per month for four years, will save $9,566.07 over the period, which at five per cent interest will earn him $1,913.21 on top of that savings – or a payout of $11,479.28 some time in 2024.
While the bonds will be lodged in the Central Bank of Barbados in each worker’s name, they will be immediately tradable, and any other public officer or any other Barbadian who is interested can work through a bond trader to buy them if they want to earn extra income from such investments.
It was not immediately clear whether the bonds or investment income would be taxable.
According to statistics seen by Barbados TODAY, while 43 per cent of public servants at the bottom of the scale will not be affected by the forced savings scheme unless asked to opt in, there are 6,166 public officers in the $36 000 to $50 000 band, 7,445 in the $50,000 to $100,000 band, and 826 paid over $100,000.
The bond scheme will include ministers and Members of Parliament, and there is a provision for bonds to be cashed in as early as 24 months by the bondholder, Barbados TODAY has learned.
A Government official said: “While some people have been critical of the plan without waiting for the details, what they should look at is that not a single public officer will be disadvantaged by this.
“To the contrary, if they can afford it they will earn five per cent on a portion of their salaries for four years without driving a stroke. If they can’t afford to they can get all their month’s [pay] as usual each month without hassle.”
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Yeah! I had savings which were earning interest for my old age. Interest of $2,400.00/yr after tax is now thanks to this BLB Gov’t less than $400.00/yr and my money due in Dec 2021 will not be paid out until 2033, when I will be 75 – if I make it that far. Other savings from my Mom left to me to help me through retirement was in Savings Bonds at 5%. This Gov’t threatened these bonds so I did not re-invest them when they matured. They then said they would NOT be offering Savings bonds. The Banks are allowed to pay only fractions of 1%/yr.
My retirement fund is being whittled away by inflation and now with COVID my job with Tourism providers is gone so I have to use the original capital to pay the rent.
If I take early retirement to get something to live on I will lose 30% of my pension, thanks to Owen Arthur who moved retirement age to 67.
My Father died at 52. My Mother diagnosed with Cancer at 65, died before her 70th birthday. I may never see that money which has been taken from me by the Government just like Mrs. Ram’s business.
They use their Parliamentary majority to legalize snatching other people’s property and giving it to their favourites.
My Sister’s good job was pulled out from under her after 15 years because they want to move CBC to a Private/Public partnership. Another crony to benefit from Public funds.
WHY would anyone trust this Gov’t on promises about taking a pay cut now to get Bonds and interest in future when they confiscated the retirement savings and jobs of so many seniors leaving us with no resources to face this Pandemic and poverty in the future.
The hypocrisy of the BLP after their condemnation of previous administrations handling of Financial crises now doing even worse and excusing it when the 26 Ministers and unknown number of “Consultants” many of whom already have big Ministerial and Parliamentary pensions are too influential to have salaries cut?
Don’t believe their empty promises. Your money will simply disappear as mine, my Sister’s, my other Sister’s Husband’s and many other seniors’ savings did and the “Interest” evaporated.
At first glance this isn’t too bad an option. The questions I would have are related to whether the bonds are purchased with pretax or post tax income which makes a fundamental difference in how much income is finally received in hand. The alternate factor to query is whether the bond investment is being taxed and if so, when is it being taxed. Is it taxable yearly or at maturity. Those are some of the factors that would need to be answered in the white paper.
Capital works, well we all know the players..
After the pain experienced by bond holders and Clico policy holders no public servant i know will be taking this promise seriously..
Now which financial institution in barbados going take those bonds..all now people aint get a cent from central bank re reslife..
is the interest compounded or simple, is it compounded monthly or annually? devil is in the details. i hope these bonds are tax deductible as paying tax on money i cant spend is unreasonable, i would hope it is tax deductable for those who hold them for the full term
Will the monies be taxed after the 4years?
Light and Power taking these bonds?
Massy taking them so I can buy food?
Sol for Gas?
When the cashier ask how i’m gonna pay, can I say “Bonds from MIA”.
Otherwise, no bonds for me. Fire half your cabinet and all the advisors !
How are people going to eat with the rising food costs? How are people to pay rent and mortgages?
They will die from stress and
hunger before the bonds mature.
It may be a meeting turn because meeting turns don’t pay interest!
What selfish comments. Think of the thousands In Barbados who have lost there jobs because of Covid19 with no hope of getting any money. The Public Service Employees should be cut because of the drop in Government Revenues which will not be recovering for a long time. and the corresponding drop in economic activity. Air Canada is sending home 20 thousand employees to save the airline. Other companies all over the world are doing the same to try and survive. The Government of Barbados is trying to raise 100 million for public’ works to try and put people back to work and take the burden off the NIS. . If you worked for any corporation you would be getting sent home, Others work days shortened. Pay cuts not bonds earning 5 percent. Boeing, British Airways. Check just what is happening to their employees . No bonds paying 5 percent.
Just support your government
The country is seriously wounded and needs your help