A Pension Adjustment Order (PAO) in relation to retirement benefits will direct the trustees or financial institution to pay part or all of the member's retirement benefit to the beneficiary of the PAO. This is called:

• A. forfeiture
• B. salary sacrifice
• C. earmarking
• D. contingency

Answer: (A)

A Pension Adjustment Order creates a direction that part or all of a member’s retirement benefits are paid to a named beneficiary. The effect is that the member loses ownership of that portion and it is transferred to the beneficiary, which is best described as forfeiture of the pension rights to satisfy the PAO. The other terms don’t fit this mechanism: salary sacrifice is a voluntary restructuring of earnings for benefits, earmarking refers to designating funds for a beneficiary in a different sense, and contingency describes an uncertain future event rather than a compulsory transfer of entitlement.