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.”