Penny Elimination FAQ
Key Messages on Elimination of the Penny
- The elimination of the penny is a federal government initiative that was announced in the 2012 Economic Action Plan as a cost-savings measure for the Canadian government. The government estimated that it cost 1.6 cents to produce each penny. For this federal initiative to be successfully implemented, it is important for the retail community to work with the federal government to help educate consumers as to the changes and be prepared to respond to questions.
- Eliminating the penny will likely result in costs to most retailers. The majority of Canadian retailers will have to change their Point of Sale (POS) systems in order to accommodate rounding options for cash payments. These costs will vary depending on the size of the retailer and the number of store fronts they have.
- Retailers will implement rounding policies on cash transactions that make sense for their customers and will do so in a fair and transparent manner.
When will pennies disappear?
Are prices on the shelf going to change?
How will this affect my purchases?
Will all retailers be rounding the same way?
Are we expecting mass confusion?
Do you anticipate an evolution back to cash?
What's actually happening on Feb. 4?
Will retailers still accept pennies?
How will this affect the Voluntary Scanner Price Accuracy Code and Consumer Protection Legislation in Quebec?
Some are saying the nickel should be eliminated as well.
Do you expect consumers to split payments between cash and electronic forms to take advantage of rounding?
Will this result in reduce revenue because of rounding?
Will retailers be adjusting their prices?
What are the rounding rules?
The Canadian Mint stopped producing pennies in the summer of 2012 and will stop circulating pennies to financial Institutions as of Feb. 4, 2013. The supply of pennies will likely begin to diminish in some areas of the country shortly after the February 4th date depending on availability. However, we expect to see pennies in circulation for many years to come.
No, the effect of the penny's elimination will only be felt at the till, when the final costs (including taxes) of all the goods purchased are tallied.
The changes will only affect cash purchases when exact change is not available. It is up to retailers to determine how they wish to proceed with rounding.
Not necessarily. The competition law does not allow RCC to advocate for a particular method of rounding and does not allow industry competitors to enter into discussions around pricing.
We expect that there will be some confusion initially among consumers, but are hopeful that education initiatives on the part of the federal government in partnership with retailers will help in minimizing the impact. Retailers are good at understanding their consumers' needs and will ensure the rounding policies meet those needs.
No, we believe the benefits offered by all forms of payment will continue to be attractive to consumers.
The Canadian Mint stopped producing pennies in the summer of 2012. On February 4th the Mint will stop circulating pennies to financial institutions and will also be encouraging them to send back any pennies that they have on hand. Also, as of February 4 the federal government will implement rounding rules for cash transactions that Canadians undertake with federal government agencies.
That is up to the individual retailer. Pennies will remain legal tender; however, as has always been the case, retailers have the choice as to what form and denomination of currency they accept.
Rounding will only apply to final purchases. The scanner price code and Quebec legislation apply to shelf pricing and will therefore not be affected.
The federal government has said it has no plans to eliminate the nickel at this time.
We anticipate that there will be a period of adjustment however retailers believe that over a period of time consumers will understand the Government's decision to eliminate the penny
Experience will vary between retailers, but it is our expectation that over the course of a business year, revenue will even out.
Individual pricing decisions are the responsibility of each retailer and the Competiton Act prevents trade associations from commenting. However, the rounding does not apply to prices of individual units but only on final total of purchases.
The federal government will be utilizing the following rounding rules. (Source Finance Canada)
- Amounts ending in 1 cent and 2 cents are rounded down to the nearest 10 cents.
- Amounts ending in 3 cents and 4 cents are rounded up to the nearest 5 cents.
- Amounts ending in 6 cents and 7 cents are rounded down to the nearest 5 cents.
- Amounts ending in 8 cents and 9 cents are rounded up to the nearest 10 cents.
- Amounts ending in 0 cent and 5 cents remain unchanged.
- Example: A 1 dollar and 83 cent coffee and a 2 dollar and 86 cent sandwich would be 4 dollars and 92 cents after the 5 percent Goods and Services Tax.
- A tax rate of 5 per cent has been provided for the purposes of illustration. Any taxes (e.g., the Goods and Services Tax/Harmonized Sales Tax), as well as any fees or duties, should be tabulated prior to rounding.
- If the customer chooses to pay by cheque, credit card or debit card, no rounding is applied and the final payment is 4 dollars and 92 cents. However, if the customer pays with cash, the final total is rounded down 2 cents to a final payment of 4 dollars and 90 cents.