Sherri Bishop, a representative of the Central Bank of Barbados’ savings bonds campaign, attributes this success to the high return on investment the security offers, noting it is significantly higher to what commercial banks are offering.
“Banks are giving you a quarter of a percent or a half of a percent. Savings bonds give you 5.5%. That’s the difference between getting $12 or $24 on a $1,000 investment after five years and getting $300 plus.”
Asked how she would respond to the cautions by some local economists about buying bonds in the current economic climate, which have prompted some Barbadians to be wary of investing, Bishop suggested that people who have reservations should look at the security’s history.
“We’ve had savings bonds for 35 years, and in that time Barbados has had difficult times, including in 1991, but investors always get their money in full and on time. If you talk to any bondholder, they will tell you that when their bonds mature, they get their money. If they needed to cash in early, they get their money.”
The Central Bank rep also took the opportunity to point out that Barbadians who bought savings bonds when the campaign began 18 months ago had already made more money on their investment than they would have if they had put their money on the bank.
Another concern that might make potential buyers hesitant is that savings bonds, with the talk of nominal values and discount pricing, can seem complicated for people new to investing, but Bishop assures Barbadians they are not that complex. She explained savings bonds are an investment with a pre-calculated end value, which is referred to as the nominal value. The buyer can determine the amount of money they want to end up with and buy that amount in bonds.
“So when you buy a $100 bond you are not paying $100. You’re paying $76.24 and over a five-year period the value of your investment increases until you get the $100. When you buy savings bonds, you are buying what you want to end up with and paying less than that upfront.”
There are also provisions for those who wish to cash in before the investment matures, and the Central Bank outlines the amount bondholders would receive at every six-month interval in something called a Schedule of Surrender Values.
“While it is a five-year investment, there is some flexibility involved. Anytime between when you buy them and when they mature you can cash them in. If you cash in early you get back everything that you paid upfront and you’ll also get some additional money if you have held them for more than a year.”
In general discussion about the savings bonds campaign, Bishop revealed that one of the major changes the Central Bank had initiated with the relaunch was to move from the security being offered periodically to it being offered throughout the year. What hasn’t changed, however, is the minimum investment.
“We increased the maximum investment to $100,000 per series for one person and $200,000 for joint holders, but the minimum investment remains $50,” she revealed. “We want to stay true to the original intention of savings bonds, which was to offer a lucrative investment for lower and middle-income Barbadians.”