OTTAWA - The demise of Canada's one-cent coin next year will cost taxpayers a pretty penny.
Finance Minister Jim Flaherty announced the impending withdrawal of the penny in last March's budget, saying the government would save $11 million a year in production costs.
That's because production of each one-cent coin had cost the Royal Canadian Mint about 1.6 cents.
But a new analysis of costs shows that redeeming the mountain of circulating pennies beginning Feb. 4 will cost taxpayers about $7.3 million a year.
The analysis projects a net cost of about $38.3 million to redeem some six billion pennies expected to be turned in by consumers and financial institutions over the next six years.
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"Find a penny, pick it up, all day long you'll have good luck!" "Nickel" just doesn't have the same ring to it.
Oh, those carefree childhood afternoons of betting on whatever came your way -- marbles, card games, races. Without pennies, those activities just got a whole lot more expensive.
Sure, it was always a bit disappointing when you went to count all the change in your piggy bank and found only three dollars when it weighed ten pounds -- but that was always part of the fun, wasn't it?
Alright, we're exaggerating -- we hope -- but pennies always served as an easy tool to help kids learn how to count (and explain why it's important to have the skill).
"A penny for your thoughts," say those people who are obviously interrupting an important daydream. Actually, we won't miss this -- we've always known our brilliant schemes were worth far more than a cent.
You know those stories your grandparents tell you about how they'd get a Coke and burger for eight cents? It will literally be incomprehensible to the next generation. (Photo courtesy of Flickr/jumpinjimmyjava)
We're not in any way recommending that you not tip servers in restaurants, but leaving at least some pennies on the table has long been a way to show that you were displeased with the service. Now, showcasing your annoyance is going to cost that much more.
Yes, we're aware that pricing something at 99 cents was an entirely psychological measure to make you believe products were cheaper than they actually were - but boy, did that ever work on us. So long, extraneous purchases! (Photo courtesy of Flickr/Mr. Littlehand)
Those lovely 'give a penny, take a penny' trays you find in most corner stores? Yeah, those won't exist anymore -- once you up the ante to five cents, people will be far less likely to drop their change inside (or for that matter, snatch it up without feeling like they're taking someone's tip).
You know the phrase, "A penny saved is a penny earned"? Well, that obviously won't exist anymore, but it goes beyond that. Our whole notion of the smallest possible denomination being worth something is going to have to transition to a coin that we already think is worth something! It's almost mind boggling. (Photo courtesy of Flickr/annrkiszt)
Costs include $53 million expected to be paid out to redeem the face value of the coins, as well as another $27 million in handling and administration costs by the Royal Canadian Mint.
Recycling the zinc and copper from melted-down pennies will bring in about $42.5 million in revenue, leaving government in the red at just over $38 million.
However, adding the $11 million in annual savings from not minting any more pennies, which ceased production May 4 this year, still gives the government annual savings of almost $4 million over the expected six-year redemption period.
The Finance Department posted a cost-benefit analysis Wednesday.
As required under government policy, the department was also required to consider non-regulatory measures for the return of pennies.
"A non-regulatory alternative option would include refusing to pay for the returned pennies," says the notice.
"This option has been rejected because, without a government commitment to cover the redemption costs, Canadians might lose confidence in the value of the penny, and other circulating currency.
"This could threaten the integrity of the coinage system as the intrinsic value of Canadian currency is based on a high level of confidence in the currency system."
A cabinet order earlier this month conferred on Flaherty the authority to pay financial institutions for the pennies they'll begin to redeem starting Feb. 4. However, they're not being compensated for handling costs, only the face value of the coins.
The mint has stamped an estimated 35 billion pennies from metal plates over the last century.
The penny remains legal tender even after Feb. 4.
As the coins are withdrawn, cash transactions will begin to be rounded off to the nearest five cents, but there are no government-imposed rules or policing.
Electronic transactions, such as those on debit cards or credit cards, would still be registered in cents.
Pennies were to have been withdrawn from circulation starting this fall but retailers successfully stalled the plan, saying they wanted to keep the coins for the holiday shopping season.