CRA indicates that payments to compensate for a break in pensionable services are treated as payments from an unregistered pension plan
A collective bargaining agreement provided that where a retired employee had a break in service due to a workplace injury, that retiree would receive the additional pension benefits that would have been provided to that individual under the employer’s registered pension plan had there been such pensionable service under the plan during the break.
CRA characterized such payments as being made from an unregistered plan (so that they would be ineligible for pension income splitting under s. 60.03 or the pension credit under s. 118(3)), but as includible in the retiree’s income under s. 56(1)(a)(i).
Neal Armstrong. Summary of 22 December 2020 External T.I. 2020-0849291E5 under s. 56(1)(a)(i).