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New boats for Coast Guard

The Canadian government has awarded a $7.6-million contract to a Delta, B.C., company that will build 27 vessels for the Canadian Coast Guard.

The federal government has been criticized for its 2013 closure of a coast guard station on Vancouver's waterfront and the spill of 2,700 litres of bunker fuel into English Bay in April.

However, National Revenue Minister Kerry-Lynn Findlay made the announcement defending the Conservatives, saying they have invested more in the Fisheries Department's assets than any other government

Zodiac Hurricane Technologies Inc. will construct 18 station-based and nine ship-based inshore-rescue boats that will be used across Canada.

The company's website says it is the largest manufacturer of professional rigid inflatable boats.

The Fisheries Department says the vessels will be part of a fleet for search and rescue operations and conservation efforts.

The Canadian Press


26883


Crucial Greek referendum

On his 10-year trip home, the Greek hero Odysseus at one point had to steer his ship and crew between Scylla, a six-headed monster, on one side of a narrow stretch of water and the whirlpool Charybdis on the other.

The Greek people are in similar dire straits as they prepare to vote on a future in which they face two painful prospects: the slow grind of years more of austerity cuts or the country's potentially catastrophic exit from the euro.

The question is whether their vote on Sunday can help them escape either. "Yes" to more budget cuts in exchange for a financial aid package for the country? Or reject it in the hope it will not lead the country out of the euro?

The referendum question makes no reference to Greece's future in the currency union. It is on a set of proposals that European creditors say they have withdrawn following the failure to forge a deal with Greece before an end-June deadline.

For the radical left-led Greek government, the proposals were unacceptable. It's urging a "no" vote and says that will have no impact on Greece's euro status.

Proponents of a "yes" vote, including a parade of former prime ministers and the main opposition party, say backing the government will jeopardize Greece's place in the euro. Instead, they argue that by voting "yes" Greece would get a new deal quickly to shore up the economy.

In fact, what might happen in each case is unclear. Analysts in the world's biggest investment banks are putting percentage probabilities to outcomes, such as Greece's exit from the euro, but no one knows for sure.

Here's a look at the events that each vote might trigger.

___

IF THE PEOPLE SAY 'NAI'

A "yes" vote backing the reform proposals creditors had made would likely see Greece turn immediately to talks on a new rescue package. Whether that leads to a swift deal that might allow Greece to reopen its banks and restore a semblance of normality to the life of citizens and tourists is another question.

Much would likely depend on what happens on the political front.

The government has said it will respect the verdict.

Greek Finance Minister Yanis Varoufakis has said he'll resign in the event of a "yes" vote and Prime Minister Alexis Tsipras has hinted as much. If the government does not collapse, it could try to build a new coalition with other parties, Varoufakish hinted.

It's not clear, however, if that would involve new elections. That would take time and without financial assistance, Greece would surely go bankrupt.

Greece is no longer in a bailout program since its previous package expired Tuesday. So it would have to negotiate a new one with its creditors that involves more money for the government and the banks and new economic measures.

That is unlikely to be agreed on overnight, meaning the harsh controls on money withdrawals and transfers may remain in place for longer than anticipated. The Greek government had to put those limits when a run on the banks started last weekend and the European Central Bank refused to increase the emergency credit it allows the banks to draw on.

Varoufakis says banks will reopen Tuesday whatever the referendum's outcome. That's unlikely to happen unless the ECB agrees to increase the credit to Greek banks. And the ECB would be under huge pressure not to do so until Greece has a new, comprehensive financial rescue package.

An additional difficulty is that Greece's creditors are singing from different hymn sheets. The International Monetary Fund has said it will not get involved in a third bailout unless it includes substantive debt relief for Greece. The Europeans, on the other hand, have ruled out debt relief until Greece makes its reforms.

"A new agreement will likely take time and the ultimate outcome may require even greater fiscal and structural commitments than the existing proposal," said George Saravelos, a strategist at Deutsche Bank. "The extent to which there is a sufficient political shift in Greece to allow this to materialize remains the key source of uncertainty."

___

IF THEY SAY 'OXI'

Despite the Greek government's assertion that a "no" vote will not lead to a euro exit, most people agree it would open up more uncertain outcomes, especially if the ECB calls time on the life-support measures to Greece's banks.

A number of European politicians, including Jeroen Dijsselbloem, the top eurozone official, have said a "no" vote would jeopardize Greece's place in the euro.

Others, such as the leaders of France and Italy, appear to be holding the door ajar for further talks. Even Wolfgang Schaeuble, the tough-talking German finance minister, has said the country could stay in the euro in the event of a "no" vote.

But investors are likely to be worried in case of a "no" vote amid fears it increases the chance of a Greek exit from the euro, or Grexit. Markets will open first in Asia.

The word 'Grexit' has dominated the past months of negotiations on Greece. But the country will not return to the drachma as soon as Monday. Rather, the risk increases the longer there is a deadlock in talks. Without a deal and without money, Greece will default on more of its debt repayments and will not be able to afford the day-to-day spending on salaries and pensions. The banks will run dry, even with the cash withdrawal limits.

In such a case, printing a new currency may be the only option available, which almost everyone thinks will be a short-term disaster for the Greek economy.

"A 'no' will result in Grexit with an uncertain future and high costs to Greek society, at least initially," said Guntram Wolff, director of think-tank Bruegel.

Odysseus got through his ordeal, but the monster ate six of his men — not a great thought for Greeks seeking to navigate the straits of bankruptcy and national pride.

The Canadian Press


PotashCorp rejected

Potash producer K+S AG has rejected a C$10.9 billion takeover offer by Potash Corp. of Saskatchewan Inc. (TSX:POT), saying the bid is too low and not in its interest.

The German company says its board of executive directors and supervisory board concluded that the offer of 41 euros per share does not reflect the fundamental value of K+S.

"Not only does this proposal undervalue our potash and magnesium products and our salt business, it completely disregards the value of our Legacy Project," K+S CEO Norbert Steiner said in a statement Thursday.

The company is building the Legacy potash project in southern Saskatchewan and it is expecting production to begin in mid-2016. It has already spent two billion euros on the project, which it says is the first potash mine to be developed from scratch in 40 years.

K+S said Legacy's book value alone represents 11 euros per share and that considering future earnings, it calculates a value of up to 21 euros per share, which it says is not yet reflected in the share price.

"We believe PotashCorp is trying to take advantage of the valuation gap to take over K+S and gain control over Legacy," Steiner said.

PotashCorp, however, said in a statement early Friday that it believes the proposed transaction would combine two best-in-class companies with minimal overlap to create a global producer in the nutrient industry.

"We believe that the combination of our two companies would create a well-capitalized, more diversified company across products, geographies, production, distribution and customers," said PotashCorp CEO Jochen Tilk.

"We are seeking to meet with K+S management at the earliest possible opportunity so that we can jointly discuss our commitments and further specify the details that would form the basis of a successful combination."

K+S also said that despite repeated requests PotashCorp made no firm commitments to protect the interests of its more than 14,000 employees worldwide.

PotashCorp added that its proposal is not predicated on closing mines, curtailing production, selling the salt business or cutting jobs.

The proposed offer valued K+S at about 7.85 billion euros or about C$10.9 billion. K+S saw its share price jump from around 29 euros to 38 euros on news of the takeover offer last week.

The Canadian Press


26055


Sexy snacks, maple drinks

Chips made out of broccoli, chickpeas and kale. Wine-spiked ice cream. Popcorn that didn't quite fulfil its destiny.

Those were some of the alternate-universe products at this week's 61st annual Fancy Food Show. Many have limited distribution and aren't easy to find, but could signal coming trends.

Buyers for places like supermarkets milled about the trade show at the sprawling Jacob Javits Center in New York City, tasting the treats on display and stuffing bags with free samples.

"It's like a secret wonderland of food," said Louise Kramer, a spokeswoman for the Specialty Food Association, the trade group that puts on the show. The expo, which featured more than 100,000 products, is not open to the public.

Here are five potential foods of the future exhibitors were showing off:

WINE ICE CREAM

Instead of a glass, this wine can be served in a cone.

Mercer's, a dairy in upstate New York, was offering tastes of its "wine ice cream," which has up to 5 per cent alcohol. The ice creams come in eight flavours including "Strawberry Sparkling" and "Chocolate Cabernet."

Roxaina Hurlburt, a co-owner of Mercer's, said the dairy has been making traditional ice cream for 60 years and started packaging the wine ice cream in 2008. She said it's sold online and in a couple of hundred locations around the country, including places like casinos and wineries.

MAPLE WATER

Is maple water the next coconut water?

Drink Maple, based in Concord, Massachusetts, sells bottles of maple water it says is tapped from maple trees.

It's the same stuff that's boiled down into maple syrup, but don't expect a thick and sticky drink. The clear liquid has the consistency of water and a lightly sweetened taste, with a 12-ounce bottle labeled as having 30 calories and 7 grams of sugar. The product also seems to hit on all the prevailing dietary trends: the company's website notes maple water is "low calorie, gluten-free, dairy-free and non-GMO."

It also says "no trees are harmed" in the collection process.

The company says it's sold in about 800 stores throughout the Northeast, including at select Whole Foods and small health food stores.

"SEXY" SNACKS

Holding a bag of chips with the word "Sexy" in big letters can cure shyness. At least that's what Sexy snacks founder Robert Ehrlich told visitors to his booth.

"When you hold a bag, you are sort of empowering yourself," he says.

The most notable aspects of the snacks may be the name and Ehrlich, whose claim to fame is his founding of Pirate's Booty. Ehrlich says the snacks are a way for people to brand themselves, as they might with sneakers or handbags. The company, based in Sea Cliff, N.Y., says its products are sold in about 1,500 locations.

The popcorn comes in flavours like "Bangin' Cheddar" and "Brazilian Coconut," and the chips in flavours including "Spinach & Matcha Tea."

HALF-POPPED KERNELS

Do you think those half-popped kernels at the bottom of the popcorn bag are the best part? Now two companies are selling bags of just those bits.

HalfPops and Pop'd Kerns offer the snacks in different flavours, with a one-ounce serving containing between 130 and 160 calories, depending on the flavour.

HalfPops, based in Bellevue, Washington, says it uses a proprietary process to cook the kernels. Six-ounce bags of HalfPops are available online and at about 2,000 locations, including some Whole Foods and Wegman's, said Mike Watts, the company's vice-president of marketing.

BROCCOLI BITES

A prevalent theme at the expo was snacks made from unusual ingredients; think bags of roasted chickpeas, cheese puffs made out of beans, and chips made out of seaweed.

Another example that fell into that category was Broccoli Bites from Rhythm Foods, which also makes kale chips. Before they're dehydrated, the broccoli is tossed in a dressing made with seeds, herbs and spices to add flavour and prevent crumbling. Each 1.5-ounce bag has 150 calories.

Even though kale has surged in popularity in recent years, Rhythm Foods CEO Scott Jensen said he expects the broccoli snacks to be a lot easier to explain and sell to buyers.

And he's already working the next vegetable snack: cauliflower.

The Canadian Press


Dollar falls, TSX rises

The Canadian dollar was down slightly as the Toronto stock market edged higher Friday morning.

The loonie traded at 79.57 cents US, down 0.14 of a U.S. cent from Thursday's close.

The S&P/TSX composite index rose 4.84 points to 14,642.83, after rising 84.66 points on Thursday.

The U.S. stock markets were closed Friday for a holiday.

On the commodity markets, the August crude contract was down 65 cents at US$56.28 a barrel and the August gold contract was up $2.20 to US$1,165.70 an ounce.

The Canadian Press


Uber cuts France service

Uber is suspending its low-cost ride-hailing service in France, hoping to defuse an escalating legal dispute and sometimes-violent tensions with traditional French taxi drivers.

The unusual concession comes after the stakes mounted this week in Uber's standoff with France: Two senior European managers for San Francisco-based company were detained Monday and ordered to stand trial, charged with "deceptive commercial practices."

It reflects the broader struggle of governments to keep up with fast-moving technology — and how to tax operations like Uber's and protect workers and consumers. Companies like Uber argue that governments are unfairly protecting entrenched industries instead of adapting to the times.

Uber Technologies Inc. has run into legal problems elsewhere in Europe, as well as in China and India.

The French battle centres around Uber's low-cost service, in France called UberPop, which links users to drivers without professional taxi or chauffeur licences. French authorities had ordered it shut down, but Uber refused, pending a legal decision at a top French court.

Uber France chief Thibaud Simphaud said in an interview published Friday in Le Monde that the company changed its mind "in a spirit of bringing peace" with authorities. An Uber spokesman confirmed to The Associated Press that the service is being suspended starting Friday night.

Simphaud and another European manager for San Francisco-based Uber were detained this week and ordered to stand trial Sept. 30. They are accused of six counts including deceptive commercial practices, complicity in instigating an illegal taxi-driving activity, and the illegal stocking of personal information.

Claiming unfair competition, taxi drivers staged a violence-marred strike last week, blocking many roads across France.

Uber's regular app-based service, which connects registered drivers with riders, continues to function in France. Uber claims to have a total of 400,000 customers a month in France.

The Canadian Press


Online groceries at Walmart

Walmart Canada will begin offering a grocery pickup service for the first time at 11 Ottawa-area locations starting next week.

The retailer will begin with six locations on July 7 and add another five on July 21.

Walmart Canada will charge a $3 fee for the service and orders must be at least $50 to qualify.

Shoppers can place orders up to 21 days in advance starting today at Walmart.ca.

Loblaw has a similar service available at a few locations in the Toronto and Ottawa areas.

The Canadian Press


Party like it's 2014!

This time last year David Howard was getting ready to host a number of high-profile corporate parties as part of Calgary's Stampede, but that's not the case this time around.

"Basically, it's gone from where last year we were producing two events a day to where we're out of the game completely," said Howard, president of the Event Group.

His company is one of many feeling the bite of low oil prices as energy companies cut back spending on this year's Stampede, which kicks off Friday.

Howard said companies are opting to host their own events with lower budgets, which he's helping them with, but the big events are scarce this year.

"The corporate Stampede parties, there will be a whole lot less of them this year," said Howard. "Where you may have seen headline bands you're now having local bands."

Spending is also down at the Stampede grounds. Sales of corporate tents and related events are down about 10 per cent compared with last year, said Stampede spokeswoman Jennifer Booth, and sponsorship of the chuckwagon races, where corporate logos are blazoned on the canvas-topped wagons, are down 21 per cent at $2.8 million.

But Booth said there are signs public interest is higher this year, with both local and international ticket sales up around two to three per cent so far.

She said locals are choosing to take "staycations," while international visitors have been taking advantage of the low Canadian dollar.

While some oil and gas companies are trimming their Stampede spending, other sectors are helping fill the gap.

Jordan Sorrenti of Sorrenti's Catering said they'll be serving 4,000 more people at this year's event.

"It's kind of a weird Stampede for us because we did have some cancellations of clients that we've done Stampede breakfast with for 20 years, but on the other hand we've picked up some new business," said Sorrenti, who expects to serve about 29,000 breakfasts at this year's Stampede.

Paul Vickers, president of Penny Lane Entertainment, which owns several venues including the Cowboys bar next to the Stampede grounds, said companies in the tech and manufacturing sectors have also taken up some of the slack.

"Corporate parties, big parties cancelled, no doubt," said Vickers. "But we've got a lot of small companies in other sectors that weren't touched quite as drastically by the oil prices."

With budgets often decided far ahead of time though, some events are still gunning for a splash.

FirstEnergy Capital booked the Barenaked Ladies to headline its FirstRowdy charity event before budgets got tight, said Beverley McCartney, a conference manager for the investment bank.

The band also played at the FirstEnergy's event last year, which fits well with the slogan for the event this year: "Party Like It's 2014!"

The Canadian Press


Debt relief irony

Forgiving debt, if done right, can get an economy back on its feet.

The International Monetary Fund certainly thinks so, according to a new report in which it argues Greece should get help.

But Germany, another major creditor to Greece, is resisting, even though it knows better than most what debt relief can achieve. After the hell of World War II, the Federal Republic of Germany — commonly known as West Germany — got massive help with its debt from former foes.

Among its creditors then? Greece.

The 1953 agreement, in which Greece and about 20 other countries effectively wrote off a large chunk of Germany's loans and restructured the rest, is a landmark case that shows how effective debt relief can be. It helped spark what became known as the German economic miracle.

So it's perhaps ironic that Germany is now among the countries resisting Greece's requests for debt relief.

Greek Finance Minister Yanis Varoufakis claims debt relief is the key issue that held up a deal with creditors last week and says he'd rather cut off his arm than sign anything that doesn't tackle the country's borrowings.

The IMF backed the call to make Greece's debt manageable with a wide-ranging report on Thursday that also blames the Greek government for being slow with reforms.

Despite years of budget cuts, Greece's debt burden is higher than when its bailout began in 2010 — over 300 billion euros ($332 billion), or 180 per cent of annual GDP — because the economy has shrunk by a quarter.

Here's a look at when Germany got debt relief, and if such action might help Greece.

___

FORGIVE US OUR DEBTS

1953's London Agreement, hammered out over months, was generous to West Germany. It cut the amount owed, extended the repayment schedule and granted low interest rates.

And crucially, it linked West Germany's debt repayment schedule to its ability to pay — tying repayments to the trade surplus it was running and expected to run. That created an incentive for trading partners to buy German goods.

The deal effectively blocked claims for reparations for the destruction the Nazis inflicted on others.

But it wasn't a one-way street.

"The London Agreement gave Germany sweeping debt forgiveness and protection from creditors, in exchange for pro-market reforms," said Professor Albrecht Ritschl of the London School of Economics.

West Germany was able to borrow on international markets again, and, free of onerous debt payments, saw its economy grow strongly.

Development activists cite that case when arguing for easier terms for troubled countries today.

"The same opportunity should be given to Greece that was given to Germany in 1953," said Eric LeCompte, executive director of debt relief organization Jubilee USA.

Greece has had some relief. Private sector bondholders lost 53 per cent of face value in a 2012 restructuring, and remaining debts have been stretched out.

Now most of Greece's debt is owed to bailout creditors. While they, notably the IMF, have indicated that the debt load should be made more manageable, little has been done of late.

___

NOT CHARITY

The German debt forgiveness was driven by the United States, which pressed others to get a deal — British creditors gave up two-thirds of what they were owed.

It wasn't charity. The U.S needed a strong West Germany as an ally against the perceived threat of the Soviet Union.

Yale University Professor Timothy Guinnane warns against making too many comparisons, partly because Germany was so much more important geopolitically than Greece today.

And Germany had economic pedigree, being a big exporter. Greece, on the other hand, hasn't, and isn't. That's partly why Germany in particular is insisting on reforms to make Greece more competitive — if they are enacted, then it's indicated it would be open to help out on the debt front.

"The U.S. was basically the last man standing after the war and essentially decided to cut Germany's debt in half," Guinnane said. "It was a hard-nosed decision ..... it's wrong to say it was an act of generosity."

___

LESSONS LEARNED

Still, there are echoes from the German case that are relevant to Greece today.

The deal to help Germany was based on a realistic way for the country to pay its debts — Greece's Varoufakis has suggested debt repayments be linked to growth. Over the bailout years, Greece has had to meet debt commitments even though its economy was in a depression.

Germany's deal also acknowledged that mistakes after World War I in imposing punitive conditions helped boost extremists. In its misery, Greece has seen votes go to radical parties of left and right, including Nazi-inspired Golden Dawn.

"It's deeply ironic that it's forcing Greece into a position that's prompting the rise of extremist parties," said Guinnane.

___

CHANGE AHEAD?

One of the reasons why relations between Greece and European creditors deteriorated is the disagreement over what to do about the country's debts. It's difficult for anyone, especially those that have endured austerity too, to accept a lower return.

But there are signs of movement as Sunday's referendum nears in Greece on recent reform proposals from the country's creditors.

Cyprus has said it could consider writing off 330 million euros ($370 million) in rescue loans to Greece. The U.S., while not directly involved, has consistently advocated debt relief.

The IMF came out most forcefully on Thursday, arguing in a report that Greece needs large-scale debt relief alongside more than 60 billion euros ($67 billion) in financing between June 2015 and the end of 2018. Given the recent economic shock related to the capital controls and the referendum uncertainty, Greece's needs will likely be significantly higher, the IMF said.

It blamed the current government for being slow on reforms and privatizations, but said it was clear the debt needed to be made more manageable.

"A significant haircut could possibly do it," an IMF official said, on condition of anonymity in line with department rules. "So could an extension, so Greece would not have to go back to the markets for a very long time."

One option the IMF mentioned was doubling the grace period on Greece's loans from EU countries to 20 years and the subsequent repayment period to 40.

"Greece needs a sort of breathing space," the IMF official said.

The Canadian Press


Google's big apology

Google is apologizing after reports surfaced that an automatic image-recognition feature in its Photos application was identifying images of some black people as "gorillas."

A New York man posted a picture of himself and a female friend on Twitter earlier this week, showing that the Google image software had tagged both of them as "gorillas," which is sometimes used as a racial slur.

Google says it's "appalled and genuinely sorry" for what happened with the image-recognition feature. It says it's taking immediate action to stop those kinds of results from appearing again.

It has been a day of apologies for the company.

A Google subsidiary has also apologized for making Nazi concentration camps part of a mobile role-playing game.

Niantic Labs says players of 'Ingress' can propose historic location and monuments for inclusion in the game, in which two factions use smartphones to battle for control of these sites. The German weekly Die Zeit reported Thursday some of the sites, known as 'portals,' were located within concentration camps such as Dachau and Sachsenhausen.

Gabriele Hammermann, director of the memorial site at Dachau, told the dpa news agency that Google's actions were a humiliation for victims and relatives of the Nazi camps.

In a statement to The Associated Press, Niantic Labs' founder John Hanke said the company has begun removing the offending sites from the game. He said "we apologize that this has happened."

The Canadian Press


Cautious view on oil prices

The Conference Board of Canada says it's taking a cautious view of crude prices, even though they've improved substantially since the beginning of the year.

The key U.S. benchmark, West Texas Intermediate, has been hovering around the US$60 mark for the past few months after dipping as low as US$44 in January.

The Ottawa-based economic think-tank expects WTI to gradually recover over the next few months, but remain below US$65 a barrel even by the end of 2015.

That's welcome in Canada's oil industry, where many drillers can't make ends meet with oil below US$50 and still struggle in the US$60 range.

The board says although a drop back to US$50 a barrel is unlikely, the days of US$100 crude are becoming an increasingly distant memory.

There are risks that could cause a pullback, like high U.S. inventory levels, greater Saudi production and a surge in U.S. shale production.

The Canadian Press


Third Sears CEO quits

Sears Canada Inc. (TSX:SCC) is looking for a chief executive officer again, following its announcement Thursday that Ronald Boire will depart at the end of this summer — less than a year after taking on the job.

He will become president and CEO of the Barnes & Noble chain of bookstores, effective Sept. 8, according to a statement from New York by the U.S. retailer.

Boire became the third CEO of Sears Canada in two years last fall. He followed Douglas Campbell who left in September 2014 and Calvin McDonald, who quit suddenly in September 2013 in the midst of a multiyear turnaround plan.

Sears Canada says the chairman of its board of directors, Brandon Stranzl, will take on a greater leadership role immediately.

In the company's first quarter, Sears Canada had a $59.1-million net loss for the first quarter as revenues dropped 9.7 per cent from the same period a year earlier.

Stranzl says he will work closely with Sears employees and business partners as Sears Canada works to return to profitability.

"We are grateful for Ron's support as we search for and welcome a new CEO," Stranzl said in a statement. "In the meantime, the management team and I are fully engaged in executing the current strategy, designed to improve our retail operations so we can best serve Canadian communities from coast-to-coast."

Barnes & Noble, Inc. noted in its announcement that Boire had extensive experience in retailing, including as executive and chief marketing officer for Sears and Kmart stores in the United States and as North American president of Toys R Us from 2006 through 2009.

Last week, Desjardins analyst Keith Howlett issued a report saying Sears Canada has less than two years to prove itself.

"The next seven quarters are 'make it or break it' for Sears Canada," Howlett wrote.

"Our current view is that an operating turnaround is improbable.''

Howlett's prediction suggests the fate of the company will be determined some time around the 2016 holiday shopping season.

The company declined to comment on the Desjardins report.

The Canadian Press


Ford ignition recall

Ford says it is recalling 52,180 vehicles in Canada because of a software bug that could leave the car running after the ignition is switched off.

The automaker says the 2015 Focus, C-MAX and Escape models have an issue affecting the body control module and it is recalling 433,000 vehicles across North America for free dealer servicing.

The company says it is possible for the engine to continue running even after the ignition is switched off and the key is removed, a problem that could cause the car to roll away or be stolen.

Ford says it is unaware of any accidents or injuries related to the issue.

The Canadian Press


Outliving your money

If you're worried that you're going to run out of money in retirement, then an annuity may be something you want to consider as part of your financial plan, experts say.

"What it allows you to do is purchase a guaranteed source of cash flow for retirement," says Jamie Golombek, managing director for tax and estate planning at CIBC Wealth Advisory Services.

With an annuity, you pay an insurance company up front in exchange for a promise that they pay you a set amount for the rest of your life or for however long the contract specifies.

The downside is that they can be expensive.

What has been good for homebuyers has created challenges for retirees looking for a secure source of income. Low long-term interest rates in recent years have driven the cost of annuities up.

Crystal Wong, senior regional manager at TD Wealth Financial Planning, said the high cost has put off some investors.

"The premium cost is expensive in a low interest rate environment," she said. "They are not as attractive as some of the other alternative investments that we offer individuals that are looking for income."

But she said for some conservative investors looking for peace of mind, an annuity might be part of the answer.

Steve Krupicz, assistant vice-president Regional Actuarial and Underwriting Consultants at Manulife, says investors may want to look at annuities for the conservative portion of a diversified portfolio.

"If you're looking for a secure, stable income to cover your base living expenses and you're concerned about longevity, that's what annuities are for," he said.

An alternative to an annuity is a systematic withdrawal plan that would see you slowly cash in your investments and spend the proceeds. However, a withdrawal plan can still carry some risk.

If the market crashes and you sustain heavy losses, you will likely have to make changes to your plan and you could also live longer that you planned and eventually deplete your resources.

There are downsides to buying an annuity.

You won't have the money in your nest egg to pay for an emergency or other large purchase down the road and you may also die sooner than you thought, in which case you may have had more money left over for your heirs if you had not bought an annuity.

Golombek said for those reasons, an annuity should only be a portion of your portfolio.

"You want to make sure you've got money if the roof breaks on your house or you need to move into a higher level of medical care or a kid needs help," he said.

"You don't want to tie up your entire life savings in an annuity. But I think for a portion of your savings, for the right client, it can be a good solution."

The Canadian Press




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