Farmers will be required to contribute at least 1%, and up to 10%, of Taiwan’s minimum wage to a dedicated account every month, which will be matched by the government. The mandatory minimum wage is currently NT$23,800 (US$803).

Plan members will start receiving a monthly pension when they reach 65 years of age.

The new pension, which is scheduled to kick off on January 1, 2021, follows the same model as the Labor Pension Fund, Taiwan’s largest public defined-contribution plan.

Legislation for the farmers’ pension was passed by the d on May 22 but was only uploaded to its website recently.

It states that in order to guarantee the plan is profitable, the investment return must not be less than the two-year fixed deposit rate offered by local banks, which is currently 0.79%.

The pension will be managed and administrated by the Bureau of Labor Funds (BLF), supervisor of Taiwan’s labour pensions, and monitored by the Council of Agriculture of the Executive Yuan, the government’s executive branch.

The government estimates the pension plan will have an annual investment return of 3%, the Council, which oversees the agriculture sector, says in a statement posted on its website.

According to the Council, the return, combined with an existing government subsidy for retired farmers, means they stand to receive around NT$37,000 a month if they start contributing at age of 30. The subsidy is currently around NT$7,750 a month.

The Council says it expects more than 13% of Taiwan’s 450,000 farmers to become plan members in the first year.

The farmers’ pension will help ease financial burden on Taiwan’s overall retirement system from an ageing population, according to Janet Li, wealth business leader for Asia at US consulting firm Mercer.

“As the BLF is overseeing the investments for seven labour pensions and annuities in Taiwan, it is cost-effective for the farmers’ pension to put its mandate outsourcing and manager selection through the BLF’s centralised platform,” Ms. Li tells Asia Asset Management.