What are savings bonds?
Savings bonds are five-year securities issued by the Central Bank of Barbados on behalf of the Government of Barbados. Savings bonds are sold at a discount, which means that investors pay less than the nominal value of the savings bonds but receive the full value when they have matured. As an example, for a savings bonds issue with a yield to maturity of 5.5%, the purchase of $500 (nominal value) would require an investment of only $381.20, and the purchaser would receive the full nominal value ($500) when the savings bonds mature.
What are the benefits of investing in savings bonds?
Because savings bonds are a low risk investment; purchasers know exactly what their return will be when the savings bonds reach maturity. Moreover, the interest earned during the investment period is tax free. Savings bonds are liquid investments, so in the event that a bondholder wishes to surrender some or all of his savings bonds he can do so by taking the certificate(s) to a commercial bank along with photo ID and will receive his initial investment in addition to any interest that his savings bonds accrued during the period he held them. (Link to Schedule of Surrender Values) In addition, people who invest refunds of pension plan contributions in savings bonds and hold them for the full five years are not required to pay withholding tax (25%) on that money. Savings bonds can also be used as collateral for loans.
Who can buy savings bonds?
Barbadians and permanent residents 18 years and older may invest in savings bonds for themselves or their children. Credit unions, registered charities and friendly societies are also allowed to purchase savings bonds.
How often are savings bonds issued?
Savings bonds are offered several times a year. Whenever the Central Bank is issuing a series, it will place ads in the local newspapers as well as on its website, Facebook page and Twitter feed.
Where can I buy savings bonds?
Savings bonds can be purchased at all local commercial banks. Persons who are investing money from refunded pension plan contributions should come directly to the Central Bank, however. Purchasers are required to complete an application form and make payment. Shortly thereafter, they will be issued with their certificate.
Is there a minimum value I can buy? Is there a maximum?
The minimum nominal value of savings bonds that can be purchased is $50 per series. For a series with a yield to maturity of 5.5%, the investment required for this would be $38.12. The maximum nominal value of savings bonds that can be purchased per series by an individual or organization is $100,000 and for joint holders $200,000. For a series with a yield to maturity of 5.5%, the investment required for this would be $76,240 for individuals/organizations and $152,480 for joint holders. Nb. For series issued before 2015, the maximum nominal value is $50,000 for all categories of bondholder.
How long do savings bonds take to mature?
Savings bonds mature five years after the date of purchase. At that time, the bondholder will receive the nominal value of the savings bonds.
Can people cash in their savings bonds before they mature?
Yes. In the event that persons wish to surrender their savings bonds, they should take the certificate(s) to a commercial bank along with photo ID and they will be refunded their initial investment as well as any interest that has been accumulated during the period the savings bonds were held. The rate of interest persons surrendering their savings bonds receive is determined by the length of time they held the savings bonds. (Link to Schedule of Surrender Values)
Where can I cash in my savings bonds?
When savings bonds mature, or in the event that persons wish to cash in their savings bonds, bondholders should take their certificate(s) along with photo ID to a commercial bank to receive payment.