A penny saved isn't really a penny earned anymore — in fact, it will probably just sit gathering dust in a jar while taxpayers shell out millions to produce new ones.

The Mint produced 455 million pennies last year, many to replace those that are promptly dropped in a jar, out of circulation. (Jonathan Hayward/Canadian Press)

That's one of the arguments put forward by politicians who met Wednesday to hash out the costs and benefits of abolishing the copper coin altogether as inflation reduces its value and consumers increasingly use debit or credit cards or do their shopping online.

"It's not the most pressing financial issue facing the nation, but it's a cost-saving measure … [regarding] a major irritant to both business and consumers," said Pat Martin, an NDP MP from Winnipeg who tabled a bill in 2008 proposing the elimination of the penny.

The Senate finance committee heard from the Bank of Canada, the Royal Canadian Mint and the Department of Finance on the costs involved in producing the penny and the potential impact of eliminating the coin.

Pierre Duguay, deputy governor of the central bank, said the impact on inflation of abolishing the penny would be "insignificant and more likely non-existent."

"Even if the elimination of the penny did result in the rounding up of prices to the nearest multiple of five cents … that would be a one-time price increase and not a change in the trend of inflation," Duguay told the Senate committee.

Catherine Swift, president of the Canadian Federation of Independent Business, said getting rid of the penny makes sense from retailers' perspective.

'It's a piece of currency that, frankly, lacks currency.—Irving Gerstein, Conservative senator

"I think, given inflation and everything, it is probably time to get rid of the penny. There's a cost to it, and we certainly have heard from members it's more of a nuisance than it's worth anymore," she said.

Irving Gerstein, a Conservative senator from Ontario and deputy chairman of the finance committee, said it only makes sense to abolish the penny if the government wants to spend less money on money.

"The production and use of the penny represents hundreds of millions of dollars every year in direct costs to the taxpayers, and that's why we are reviewing it," Gerstein said.

"It's a piece of currency that, frankly, lacks currency."

Costs more than a cent to make a penny

The Mint wouldn't disclose the exact cost of producing a penny, but Martin said estimates range from anywhere between 1.5 cents to as much as four cents when you factor in shipping, distribution and labour costs.

Combined with the lost productivity that comes from consumers and business owners handling such small change, Martin estimated that pennies cost the Canadian economy $100 million to $150 million each year. Gerstein said some estimates peg the cost as high as $220 million a year.

However, the penny still has some ardent supporters.

"There's an irrational romantic attachment to the penny that harkens to some bygone era."—NDP MP Pat Martin

"I've had passionate letters from seniors about, 'How we can ever teach our children to be frugal if you can't teach them the value of a penny?"' Martin said. "There's an irrational romantic attachment to the penny that harkens to some bygone era when you could still go down to the store and buy penny candy."

Pennies gather in automobile cup holders, unusable in parking meters, toll booths or vending machines. (Andrew Vaughn/Canadian Press)

According to the Mint, there are about 28 billion pennies in circulation and 455 million were produced last year. One of the concerns raised by anti-penny advocates is that the Mint is producing coins to replace those that are voluntarily taken out of circulation by people who dump them in a jar and can't be bothered to spend them.

"They have no commercial value. I think the biggest proof that pennies have outlived their usefulness is the little dish of free ones next to cash registers. You don't see a little dish of loonies saying 'Take one,"' Martin said.

Since 1908, the penny has lost 95 per cent of its purchasing power, Duguay said. In other words, a penny in 1908 was worth the equivalent of 20 cents today.

Martin's bill is still on the table. He said consumers would be given five years to cash in their pennies at the bank for larger denominations of currency once the Mint stops producing the coins, and then they would be taken out of circulation entirely. Cash payments would either be rounded up or down to the nearest nickel, depending on the total.

Other countries, including Australia and New Zealand, have already eliminated their pennies. New Zealand has also eliminated its five-cent coin.