A PAO is a legal instrument directing:

• A. Freezing pension rights
• B. Terminating membership
• C. Paying part or all retirement benefits to the PAO beneficiary
• D. Creating a new pension scheme

Answer: (B)

The main idea being tested is what a PAO is used to direct in relation to a pension arrangement. A PAO functions as a legal instruction that ends the member’s participation in the pension plan, i.e., it terminates their membership. It tells the pension administrator to formally remove the person from the scheme and stop their continuing rights and involvement there.

This is why terminating membership is the best fit: the instrument is about ending the link between the individual and the plan. It is not about temporarily freezing rights, which would imply a pause rather than an end; it is not about paying benefits to a beneficiary, which would involve a separate distribution or assignment action; and it is not about creating a new pension scheme, which is a different type of action entirely.