Canada’s coin collection: Is it common sense to keep the five cents?
It’s been four years since the penny ceased distribution in Canada. Should the nickel be the next to go?
Removing coins from currency are “always very long discussions,” described Sean Isaacs, an avid coin dealer and collector. Isaacs runs Alliance Coin and Banknote, a family-owned business in Almonte, Ont.
“We were talking about eliminating the penny for 20 years before it actually happened,” he said. “If they’re talking about the nickel now, it’ll be a decade or two before it happens.”
The penny as the nickel’s trial run
Desjardins, the largest cooperative financial group in Canada produced a a report in 2007 that urged the federal government to “seriously consider stopping the issuance of the penny and removing it from circulation.” In an updated 2016 report, Desjardins predicted the “time will come” when the nickel will follow suit.
“Eventually the purchasing power of the nickel will be so low that it’ll be less and less useful to keep it.”— Hendrix Vachon, a senior economist at Desjardins.
The Conservative federal government used the same reasoning for ceasing distribution of the penny in 2013 when its value eroded until it only retained 1/20th of its original purchasing power.
“The elimination of the penny was an important cost-saving measure, estimated to save taxpayers approximately $28 million over the first six years of its phase out,” according to an email received from an official at The Department of Finance Canada. “There are also ongoing savings of $11 million a year as a result of ceasing the production of the penny.”
The Royal Canadian Mint produced the last penny on May 4, 2012 in Winnipeg.
With these benefits, there is speculation that Canada will ditch its next lowest denominating coin, the nickel. It wouldn’t be the first country to do so – New Zealand and South Africa phased out their five cent coins in 2006 and 2012, respectively. In both countries, the transitions seem to have been smooth.
However, unlike the penny, the nickel isn’t costing the Canadian government money.
The nickel “costs less than its face value to produce and plays an important cost-effective role in Canada’s denomination mix,” according to a spokesperson from Finance Canada.
The spokesperson added that Finance Canada has “no plans to eliminate the nickel.”
Big change for pocket change?
However, in today’s digital age, cash is already losing ground as a method of payment, for reasons such as security and easier access to banks with debit cards.
“With each passing year, fewer and fewer transactions are done in cash,” said Karl Littler, vice-president of the payments committee at the Retail Council of Canada.
Therefore, the removal of the nickel would have no practical impact on retailers, Littler added.
Vachon predicts that cash will need to innovate in order to become more competitive with other methods of payment.
“One way to innovate cash is to remove coins that are useless – like the nickel,” he said.
This would cause denominations to round to the nearest 10 cents, he explained. Quarters would also need to be removed from the system and replaced with 20 and 50 cent pieces.
Vachon believes consumers would be confident in the system after the smooth removal of the penny.
“I know with the penny, people were worried about inflation. But it didn’t happen,” he said. “We saw fair rounding up and rounding down.”
Remembering the penny…
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According to a representative at the Royal Canadian Mint, many Canadians felt cent-imental about the change when pennies were eliminated from Canada’s coinage system as part of the 2012 Economic Action Plan budget.
“When it was going out of circulation, there seemed to be an emotional tie to it,” reminisced Christine Aquinoe, director of communications and public affairs at the Mint.
“We heard a lot from the Canadian public that they would miss it over the years.”
Aquinoe described how the Mint’s social media was flooded with testimonials and memories of the penny at the time of its elimination.
“When people were kids, they remember using pennies at the store, and their grandparents would give them collector pennies, that type of thing,” she said. “[There were] a lot of heartwarming stories and it was great to connect to the public like that.”
Aquinoe’s own personal tribute to the currency came shaped as a furry friend: she named her new copper-spotted rescue dog ‘Penny’ shortly after the phase-out period began.
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