The Senate finance committee is recommending that the federal government remove the penny from circulation and that guidelines be established for rounding off purchase prices for cash-only transactions.
The committee also recommends that production of the penny for circulation cease "as soon as practicable" with 12 months notice, until the copper is no longer considered legal tender.
Canadians' emotional attachment to coppers gathering dust in their jars, cars, pockets and cans "far outweighs their value," said Senator Richard Neufeld, the committee's deputy chair.
"The fact is, the penny is not much use anymore," Neufield told reporters on Tuesday in Ottawa.
The report also recommends that the Bank of Canada continue to redeem pennies indefinitely, while banks could choose how long they'd redeem the one-cent pieces.
It also called for the federal government to encourage charitable organizations to implement fundraising campaigns that would assist in removing the penny from circulation.
In a statement Tuesday afternoon, Finance Minister Jim Flaherty thanked the committee for its study of the issue and said the federal government looks forward to "carefully reviewing" its findings and recommendations.
Cost to make a penny: 1.5 cents
The Bank of Canada says the copper-plated coin has lost 95 per cent of its purchasing power since 1908, when it was first produced in Canada.
It now costs more to produce the penny — about 1.5 cents each — than the coin's actual face value, while items that cost a penny 100 years ago now cost 20 cents, the report said.
The Royal Canadian Mint has been forced to sharply increase penny production in recent years as more and more Canadians hoard, rather than spend, their one-cent pieces.
The committee recommended that the mint be allowed to decide whether it is profitable to continue limited production of the one-cent coin for direct sale to collectors.
The senators estimated that hoarding of pennies amounted to 600 coins per person across the country.