The Penny's Time Has Come
The Canadian federal government says the time has come to stop making pennies. They take up too much time and space, and they cost too much to make. In the 2012 Federal Budget the government announced that in the fall of 2012, as part of the government's efforts "to implement moderate restraint in government spending" the Royal Canadian Mint will stop producing and distributing pennies. The Mint actually stopped producing pennies in May 2012 and February 4, 2013 has now been set as the date after which the Royal Canadian Mint will no longer distribute pennies. Consumers will still be able to use pennies for transactions indefinitely. When pennies aren't available then transactions are to be rounded to the nearest five-cent increment "in a fair and transparent manner."
Senate Committee on One-Cent Coin
This isn't a new idea. In 2010 the Senate Committee on National Finance did a study on the costs and benefits of the Canadian penny. After months of hearing witnesses, including government officials, retailers, bankers, consumer groups, charities, coin collectors and economists, the Senate Committee report The Costs and Benefits of Canada's One-Cent Coin to Canadian Taxpayers and the Overall Canadian Economy concluded that it was time to take the Canadian penny out of circulation. The Senate Committee also recommended setting a clear date after which the penny would no longer be considered legal tender. The government hasn't gone that far, but the demise of the penny is clear.
Why the Penny Should Go
There are a lot of reasons the penny's time has come.
- the purchasing power of the penny has been eroded. What used to cost a penny, now costs 20 cents.
- the Canadian penny costs too much to produce and distribute. It costs 1.6 cents to produce, distribute, handle and process a penny today. While the government originally said that it costs that It costs about $11 million a year to supply pennies to the Canadian economy, they have since done a cost-benefit analyis taking into account the cost of redeeming about 6 billion pennies expected to be turned in by consumers and financial institutions ove the next six years as well as the handling and administrative costs of the Mint, and the numer is more like $4 million in savings over six years.
- electronic payment methods have undermined the relevance of the Canadian penny.
- removing the Canadian penny would increase the productivity of the retail and service sector.
- there will be environmental benefits to withdrawing the penny. The use of base metals in production will be cut, base metals from withdrawn pennies will be recycled and energy will be saved on penny production, transportation and distribution.
How Withdrawal of the Canadian Penny Will Work
- In the fall the Mint will stop distributing Canadian pennies.
- In the fall businesses will be asked to return pennies to their financial institutions so they can be sent back to the Mint to be melted down and their metal content recycled.
- Pennies will still be able to be used in cash transactions.
- If pennies are not available, cash transactions should be rounded up or down to the nearest five-cent increment in a fair and transparent manner. Rounding should not be done on individual sales items. It should only be applied on the final total price. Rounding should only be applied after GST or HST.
- Non-cash transactions - cheque, debit card, credit card - will still be settled to the penny.
- Businesses will not have to update their cash registers for rounding, since prices and the final total payment will still be set at one-cent increments.
Consumers will be able to redeem their pennies at financial institutions indefinitely. It is quite likely the banks will ask you to roll your coins. Because of the number of pennies that Canadian have hoarded, the government is encouraging Canadian charities to hold penny drives, and encouraging Canadians to contribute to them. However, they are cautioning charities to consult their financial institution before starting a fundraising campaign in relation to the phase out of the penny. Individual financial institutions will be able to give advice on their procedures for redeeming pennies.
Canadian Penny Facts
- In 2011, the Royal Canadian Mint produced 600 million pennies.
- About 35 billion pennies have been minted in Canada since 1908.
- The modern Canadian penny has a design of two maple leaves on a twig. The maple-leaf design is by G.E. Kruger Gray and was first used in 1937.
- The composition of the current penny is 94% steel, 1.5% nickel, and 4.5% copper plating or copper-plated zinc.
- Since 2000, the Canadian penny has weighed 2.35 g, has a diameter of 19.05 mm and a thickness of 1.45 mm.