Legacy Tracker: Life without the penny…will it be painless?

No more pennies for you! (or us)

The coffee line maybe a little longer than usual on Monday when life without the penny begins Monday (Feb 4^th) and Canada starts…”to round”. Finally the rounding homework of our youth will be put into action.

The Royal Canadian Mint stopped making Canadian pennies back 8 months or so ago but the last shipment to financial organizations is now shipped. There will be no more penny supply.

Are we ready? The Retail Council of Canada says that 53% of Canadian retail businesses are ready to handle life without the penny. (I think that means that 47% are not ready). According to the same survey, some retailers will round down ALL transactions, some will use the Federal rules and others will be rounding down sales below five cents and rounding up above five cents. It is the retailer’s decision as to which method to follow

But, getting rid of the penny is part of the “Economic Action Plan 2012” so the Government means business when they said the penny was being phased out/terminated/eliminated. So, that’s really the end. Or is it? Here’s what you may need to know (or maybe not) :

· How will rounding work? It could be complicated. Therefore, I have devoted a separate paragraph to this question. If you can't wait to find out...please skip to the bottom of this page and come back.

· You can still use pennies but stores will no longer HAVE to accept them as of Feb 4^th. As of this date, stores are being encouraged by the Government to start rounding. Over time (or Monday) you may find retailers starting to turn up their noses when you pull out your pennies.

· Not all businesses will be updating their cash registers. A recent Retail Council of Canada survey shows that 63% of the larger retailers will be changing their POS systems but only 24-25% of small-medium sized retailers will change their cash registers. That means there will be a lot of manual rounding at the cash and some confusion at the beginning

· No change to change if you pay for something in a non-cash way, like cheques or electronic payments like credit card or debit.

· Thankfully, there will be no rounding up of tax or other fees. Only the final total. You will not be paying any more or any less HST.

· You can get rid of your pennies by still taking them to the bank. They may require you to roll them up or wrap them up properly-but it’s up to each bank. There is no deadline for turning in your pennies so if you want to hold onto them for a little while longer (or forever) ; you may do so.

· You can also get rid of your pennies by passing them along to a number of charities who are taking this opportunity to relieve you of your pennies. I think that’s smart and hopefully successful. The charities that I am aware of that are holding such drives are:

o Canadian Guide Dogs for the Blind

o Free the Children – Nationwide penny drive from Feb 4-9 for fresh water

o Habitat for Humanity-Nationwide Penny Drive

· Yes! Refunds in cash are also expected to be rounded

· From an income tax perspective, the amount gained or lost on cash transactions due to rounding would be considered as income for a taxation year. According to CRA..they will “use the same risk assessment and management techniques used prior to the penny’s elimination to analyze every tax and GST/HST return filed” to identify who should be fagged for “further CRA intervention”. Not sure if that’s good or bad.

· Rounding rules apply to our US tourist friends as well who are using US currency. (A different blog post will be devoted to my issue of our best American friends not accepting our coins anywhere I have visited in the US)

Life without the penny might be sad but it will be a long time before we never see another penny or before the pennies we keep are worth more than a penny. An estimated 35 billion pennies have been produced by the Royal Canadian Mint since they opened for business in 1908. The Mint estimates that 6 billion pennies have or shortly will be recovered so that leaves ….about 29 billion pennies around.

So…How will rounding work?

This is where I expect it will get tricky because there is no clear answer. The Government has said that they expect businesses to round the final amount (and change owed) in a fair, consistent and transparent manner. Other countries we are told have been able to phase out low denomination coins (Australia and New Zealand) with fair rounding practices being respected; so that’s essentially telling us we should be able to handle it and it will be embarrassing if there is a fuss. However, the Government has provided some guidelines to businesses and some nice pictures.