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Canada to let the penny drop

Tags: Budget 2012

Canada's puny penny coin, loved by some but an annoyance to many, will be withdrawn from circulation this year because it costs too much to make and is a pecuniary pest, the government announced on Thursday.

Ottawa said the penny retained only one twentieth of its original purchasing power. It costs 1.6 cents to produce each one cent coin and stamping out the penny will save around $11 million a year.

"Some Canadians consider the penny more of a nuisance than a useful coin. We often store them in jars, throw them away in water fountains or refuse them as change," the government said in a budget document.

"Financial institutions face increasing costs for handling, storing and transporting pennies. Over time, the penny's burden to the economy has grown relative to its value as a means of payment," it said.

Other nations that have either ceased to produce or have removed low denomination coins include Australia, Brazil, Finland, Israel, the Netherlands, New Zealand, Norway, Sweden, Switzerland and Britain.

The Royal Canadian Mint will stop distributing penny coins to financial institutions later this year. As the coin slowly disappears, prices for cash transactions will be rounded up or down to the closest five cents.

Non-cash payments such as cheques, credit and debit cards will continue to be settled to the cent. CTV Two CTV News CTV News Channel BNN - Business News Network CP24