In Canada’s Economic Action Plan, the Government of Canada announced the elimination of the penny from Canada’s coinage system. However, the penny will retain its value indefinitely and can continue to be used in payments. The Royal Canadian Mint will stop distributing new pennies in February 2013. As pennies are gradually withdrawn from circulation, the price of cash transactions will be rounded.
About the Initiative
The decision to withdraw the penny from circulation was driven by its low purchasing power, its rising cost of production relative to face value, the increased accumulation of pennies by Canadians in their households, environmental considerations, and the significant handling costs the penny imposes on retailers, financial institutions, and the economy more generally.
In contrast to other coin denominations, the Government loses money on every new penny produced by the Royal Canadian Mint. It costs the Government 1.6 cents to produce each new penny, which exceeds the penny’s face value by 0.6 cents. The estimated savings for taxpayers from eliminating the penny is about $11 million a year. The penny will retain its value indefinitely and can continue to be used in payments. However, as pennies are gradually withdrawn from circulation, price rounding on cash transactions will be required. In removing its lowest-denomination coin, Canada will follow on the successful experiences of many other countries, such as Australia and New Zealand.
Who Will Benefit
Canadians will be able to easily adapt to the elimination of the penny. Pennies that are still in circulation or are held by Canadians will retain their value, and consumers can continue to use them indefinitely to make payments. Canadians can also redeem rolled pennies at their financial institutions. Canadians who have saved a substantial amount of pennies over the years can also consider donating these to charities.
Retailers and other businesses can continue to price goods and services in one-cent increments and there will be no obligation to reprogram cash registers. When settling transactions in cash where pennies are not available, businesses are expected to round prices in a fair, consistent, and transparent manner.
Financial institutions will realize significant cost savings in no longer handling pennies. Given the large volume and weight of pennies, the handling, storage and transportation of these coins are costly for them.
The redemption of pennies presents a fundraising opportunity for charities.
Initiative Update
Following consultations with Canadian small business and retailers, to facilitate the transition to a “penny-free” economy, the Government selected February 4, 2013 as the date when the Royal Canadian Mint will no longer distribute new pennies. This lead time will ensure that all those participating in the transition will have ample time to prepare their business, train staff, and better inform consumers. It will also allow charities to hold dedicated “penny drive” campaigns outside of existing fall fundraising drives. The transition date will not require new production of pennies, as the existing supply available for circulation remains sufficient to cover the period.
The Department of Finance Canada continues to consult with Canadians on all aspects related to the elimination of the penny.
Find Out More
For more information, please visit the Department of Finance Canada Eliminating the Penny Web portal.