Understanding BOSS

The Barbados Optional Saving Scheme (BOSS) was established by Government to help stabilise the economy, which is facing the fiscal challenges presented by the COVID-19 pandemic. The disruption in the labour market has put pressure on the National Insurance Unemployment Fund at a time when Government is coping with significantly lower revenues and higher COVID-related expenditures.

BOSS is an 18-month initiative established by Government in July 2020 to generate economic activity by shifting a portion of its spending on wages to the capital works programme. The scheme is earmarked for public servants within central government or select state-owned enterprises that receive transfers from Government.

Workers whose income after statutory deductions (NIS and income taxes) exceeds $36,000 are allocated bonds monthly on a sliding scale, and are provided with the immediate option of converting some or all of the bonds to cash by selling them to the Central Bank. Employees may vary their demand for bonds from month to month by indicating the respective adjustment to their payroll no later than the 5th of each month.

The Central Bank is the registrar, transfer and paying agent for the bonds, but, on the request of the worker, it will purchase the bonds on payday and place them for sale on the secondary market. Persons may also sell the bonds directly to friends or family as well as trade them at a subsequent date on the market.

Individuals may elect to take up to 25% of their net income in bonds, subject to an overall cap on issuance of $8.5 million each month. Over the life of the programme, the maximum issuance approximates at 1.7 percent of current GDP and it is not projected to alter the Government’s debt target of a 60% debt-to-GDP ratio by FY2033/34. The bonds will be amortised on a monthly basis beginning four years after their issuance.

For the month of July, 2020, $4.6 million in bonds were issued, and of this amount $1.2 million was retained by public servants. The remainder ($3.4 million) was sold on the secondary market to individuals and institutions.  

Persons interested in purchasing bonds can download an application form, available on the Central Bank’s website, and indicate their interest in making a lump sum purchase or a monthly purchase. Persons who cannot be accommodated in the month in which they apply will be rolled over into subsequent issues.

Traditionally, most public servants limit their investments to real estate or deposits in banks or credit unions. Bonds and equities are often held to maturity. This bond instrument directly issued to public servants offers the potential of broadening the investment horizon of the new bondholders and it creates the opportunity for the development over time of a more vibrant capital market.