Question Tag: Pension Schemes

Defined Benefit Schemes
A defined benefit scheme provides a clear and definite pension benefit upon retirement. The benefits are usually calculated based on the length of service and final salary or an average of the last few years’ salaries. In Ghana, the Basic National Social Security Scheme is a defined benefit scheme, managed by SSNIT, where participation is mandatory for public and private sector workers.

Defined Contribution Schemes
A defined contribution scheme involves contributions made by the employer and/or the employee. The contributions are invested, and the employee receives pension benefits based on the accumulated contributions and returns on the investments. The benefits are not fixed and depend on the performance of the investments. In Ghana, Tier 2 and Tier 3 pension schemes are defined contribution schemes, where contributions are managed by privately licensed providers.