By Charles Morgan and Hubert Walker for CoinWeek ……
Royal Mint Refusal to Redeem Commemorative Coins at Face Value Calls Into Question Value of Modern Collector Issues from the UK
The Royal Mint of the United Kingdom, one of the world’s leading mints and manufacturers of circulating and commemorative coins, has established a disturbing precedent by actively advising UK banks not to redeem collector coins at face value–despite the fact that the Royal Mint states in its online product descriptions that collector coins are legal tender in the UK.
It’s a move that troubles industry insiders and the British public, many of whom were unaware that the commemorative coins they’ve bought over the years have no practical monetary value.
The issue came to prominence at the end of 2015, when the Mint learned of a scheme wherein buyers would order bulk quantities of the Buckingham Palace £100 commemorative coin only to later redeem them at face value.
According to article published in January 9 by the UK financial website thisismoney.uk, one man purchased 293 of the coins in order to accrue airline miles on his credit card.
It wasn’t his first time, either. The man, identified only as “James”, said he would “purchase the face value of coins of £20, £50 and £100 and max out [his] credit card.” Then he would take the coins to a branch of HSBC Bank and redeem them.
This seemed to work, until it didn’t.
For while James was making deposits, the bank was seeking guidance from the Royal Mint on what to do with these precious metal commemorative coins – coins that, while advertised as “legal tender”, were not intended for circulation.
An image purporting to be correspondence from Royal Mint regional director of sales Cheryl Morgan, dated January 5, 2016 and printed on Royal Mint letterhead, was posted on the This Is Money website. It seems to explain the mint’s position on redemption – however the letter does NOT contain a signature.
Further to discussions with a number of members I am writing to confirm the process for anyone wishing to redeem commemorative £20, £50 & £100 coins.
The coins are issued for commemorative purposes only and are not intended to be used as cash.
Members should not accept the coins at bank branches and customers who wish to return the coins should be referred to the Royal Mint.
We will accept the coins returned in their original packaging along with proof of purchase.
Grateful if you could inform members accordingly.
Regional Director of Sales
Presumably acting on the Mint’s guidance, HSBC refused the coins – but only after a teller had initially accepted them.
Fortunately for James (but maybe not so much for his preferred bank branch), he unloaded 210 of the coins before being told that the remaining 80 would not be accepted.
At the time of this writing, 80 £100 pound commemorative coins, if convertible to circulating money, would have a value of US$11,303, with an intrinsic value of approximately $2,441.60.
What is Legal Tender, Exactly?
A country’s government is empowered to enact its own guidelines as to what constitutes legal tender and what practical limitations apply to those rules within its sovereign territory.
In the United States, for instance, all “[U.S.] coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues”, while “…foreign gold or silver coins are not legal tender for debts.”
This means that a U.S. American Silver Eagle or $10 Olympics gold coin can be used as legal payment up to and including its face value. U.S. law does not provide for additional value to be ascribed to coins that are intrinsically more valuable than their face value.
In Canada, legal tender “refers to the money approved [by the government] for paying debts.” Unlike in the United States, Canada limits the legal tender of coins based on denomination.
And while Canada has no laws compelling businesses or banks to accept any form of currency as payment (the two parties of a transaction must agree on the payment method), when it comes to Canada’s commemorative coins–which, like the Royal Mint’s UK commemoratives, are struck as collectibles and not circulating money–“arrangements are in place with Canada’s major financial institutions to help customers redeem their face value coins, if they cannot directly return them to the Mint.”
So says Alex Reeves, senior manager of the Royal Canadian Mint’s Communications Department.
But the Royal Mint of the United Kingdom offers a much more nuanced definition of legal tender.
From the Royal Mint’s website:
Legal tender has a very narrow and technical meaning in the settlement of debts. It means that a debtor cannot successfully be sued for non-payment if he pays into court in legal tender. It does not mean that any ordinary transaction has to take place in legal tender or only within the amount denominated by the legislation. Both parties are free to agree to accept any form of payment whether legal tender or otherwise according to their wishes. In order to comply with the very strict rules governing an actual legal tender it is necessary, for example, actually to offer the exact amount due because no change can be demanded.
In addition, the Royal Mint provides the following guidelines for the maximum legal tender of each of the coin denominations that it strikes:
- £100 – for any amount
- £50 – for any amount
- £20 – for any amount
- £5 (Crown) – for any amount
- £2 – for any amount
- £1 – for any amount
- 50p – for any amount not exceeding £10
- 25p (Crown) – for any amount not exceeding £10
- 20p – for any amount not exceeding £10
- 10p – for any amount not exceeding £5
- 5p – for any amount not exceeding £5
- 2p – for any amount not exceeding 20p
- 1p – for any amount not exceeding 20p
It is interesting to note that the coin denominations of £20, £50 and £100 are all special commemorative issues, and not struck for general circulation. Yet, according to the Royal Mint, coins in these denominations have unlimited legal tender status.
Up until January 2016, there was no mention made on the Royal Mint’s website regarding limitations to the legal tender status of collector coins.
But on January 10, five days after the purported letter from the Royal Mint that advised banks not to accept collector coins, the Mint updated their Legal Tender Guidelines, adding the following language about certain denominations of collector coins:
In practice this means that although the face-value UK coins in denominations of £5, £20, £50 and £100 are approved as legal tender, they have been designed as limited edition collectables or gifts and will not be entering general circulation. As such, UK shops and banks are not obliged to accept them in return for goods and services.
We receive a lot of enquiries about face-value coins (including £5 crowns, £20, £50 and £100 coins) and their legal tender status. Each issue is authorised by Royal Proclamation in accordance with the requirements laid down by the Coinage Act 1971. This means that in common with coins in general circulation these coins have legal tender status.
Please note that whilst the coins are legal tender, banks are not obliged to accept the coins. The Royal Mint cannot accept returns of such coins outside of the 14 days return policy.
The new language is convoluted but seems to say that businesses, banks, and even the government are under no obligation to accept the coins at face value under any circumstances. It makes no mention of the Mint’s possible role in advising these companies and institutions not to accept the coins in the first place.
Beyond that, by emphasizing the limits on its return policy (which, of course, any responsible retailer should have in place and state plainly), the Royal Mint is making it clear that it is not offering to redeem the coins as legal tender but will instead grant refunds for these collectible items as retail consumer goods.
Pages for individual coins for sale on the website were updated as well.
The description for the 2015 Longest Reigning Monarch UK £20 Fine Silver Coin was changed from “A coin worth its intrinsic value – £20 for £20” to “This coin has been designed to be a limited edition collectable or gift and will not be entering general circulation. As such, UK shops and banks will not accept it…”
The same goes for the Buckingham Palace 2015 UK £100 Fine Silver Coin and the Britannia 2015 £50 Fine Silver Coin, among others.
Why It Matters
Without getting into its defining physical characteristics, a “coin” as such is a monetary instrument issued under the authority of a government. If you’re using it in the sovereign territory of the issuing government, then a coin has historically been backed by the force of law as a method of payment for debt obligations.
In other words, most people would reasonably believe that a coin by definition has what is understood as legal tender status. You can spend them.
Nevertheless, the Royal Mint suggests that this commonly-accepted aspect of coinage applies solely to coins struck for general circulation. It assumes a special, quasi-legal space for commemorative issues that allows the government to market the material as legal tender–going so far as to stamp widely-understood legal tender denominations on the coins themselves–and then recuse itself, after the fact, of the debt obligation once the issue is released. All without notifying the public (including potential buyers in a secondary market) or allowing an exchange window.
Under normal circumstances the differing assumptions of the Mint and its consumer base wouldn’t be an issue, as the typical Royal Mint collector coin costs several times more than its face value and a rational individual may not find the idea of using it as money in a third-party commercial transaction an attractive proposition.
Consider the forthcoming Beatrix Potter silver 50p coin that the Mint is offering for £55 and marketing as the “first and only official UK coin to celebrate Jemima Puddle-Duck”. It contains eight grams of silver, which is worth approximately £2.34 at the time of writing.
Or the 2016 Great Fire of London cupro-nickel £2 coin featuring the delightful edge engraving “THE WHOLE CITY IN DREADFUL FLAMES”. That coin costs £10.
Spending either one of these is an inefficient way to rid yourself of these novelty coins.
But that wouldn’t necessarily be the case for the Royal Mint’s larger denomination coins, offered to collectors at face value. Frankly, the redemption of these coins should have been expected; in a thin secondary market, dealers and collectors would be just as likely to cash them in as sit on the inventory looking for a buyer.
Dealers in the U.S. CoinWeek spoke to concerning these higher denomination coins suggested they would only buy the coins at below face value. And based on the Royal Mint’s publicly-stated position on the matter, we imagine that the same will hold true eventually in the UK as well.
The legal tender status of numismatic items is a major reason why collectors purchase coins from the world’s national mints. The Royal Mint would know this simply by looking at the volume of business they do in legal tender coinage compared to the sales figures for medals, tokens, and all the other non-coin material.
Furthermore, in the case of the 293 £100 coins, the Mint did not have to honor that order. According to the WayBack Machine, the Mint had imposed a strict limit of 10 coins per household on the issue. That limit was later lifted.
And while Gresham’s Law (bad money chases good out of the market) would see to it that collector coins containing silver would get scooped up by hoarders, it would appear that the Royal Mint has tried to find a new application of the 45-year-old Coin Act to justify the fact that it can strike these souvenir trinkets at will, market them to loyal customers as real coins and then, through backdoor channels, instruct banks not to accept them at face value.
Collectors deserve and should expect better. The Royal Mint has let them down.
Editor’s Note: In preparation for this article, CoinWeek reached out to the Royal Mint for comment. As of press time, we have not received an official response. We do, however, expect to receive one later in the week. CoinWeek will post the Mint’s response as soon as it arrives.
 31 U.S. Code § 5103 – Legal tender
 Currency Act. R.S.C., 1985, c. C-52: http://laws-lois.justice.gc.ca/eng/acts/C-52/page-1.html
Buckingham Palace £100 Silver Coins Currently Available on eBay
On February 29, 2016, the Royal Mint released its 2016 Peter Rabbit sterling silver proof coins for £55 each. After five days all 15,000 coins were no longer available for sale by March 4, 2016. The increase in value of these coins on the secondary market has been tremendous. On ebay Friday March 25, 2016 @ 15:54:38 PDT, one such Peter Rabbit silver coin resold for £499.95 = $707.18. That calculates to be £499.95/£55 = 9.09 fold increase over its original issue price. £499.95/£2.34 = 213.65 fold increase over its intrinsic silver value. That same ebay seller has since increased his asking price to £599.95 = $848.63 for each coin. On Thursday March 24, 2016, the Royal Mint released their final three Beatrix Potter Coins. The Sterling Silver Proof Coins for Jemima Puddle-Duck, Mrs. Tiggy-Winkle and Squirrel Nutkin each cost £55 and have a mintage of 15,000 each.
Sunday March 27, 2016 @ 12:33:49 PM PDT on ebay, a new highest resold price has been set for a 2016 Royal Mint Peter Rabbit Sterling Silver Proof Coin with the auction of item # 322043368516 for £620 = $876.99, which is more than the current cost of ½ troy oz. of gold. £620/£55 = 11.27 fold increase from its original Royal Mint issue price of £55.
For the no longer available 2016 Royal Mint Jemima Puddle-Duck sterling silver proof 50 pence coins, ebay Buy It Now item #141939732703 sold for £299.99 = $433.43 on Thursday March 31, 2016 @ 12:11PM. As calculated from £299.99/£55, this is an amazing profit of 445% over their issue price of £55 since a week ago when the final three Beatrix Potter coins were released. On ebay asking prices for the Jemima Puddle-Duck sterling silver proof 50 pence coins are now as high as £620 = $891.13 each.
Interesting piece that highlights an important issue, but I would note that in the U.S. businesses are not obligated to accept any particular forms of payment. They do not have to accept a bag of pennies even though the pennies are legal tender, and apart from the fact that most tellers have no idea what a Silver Eagle is, they can also refuse that as payment if they want to. As far as banks, though, I am pretty sure they must accept all legal tender.
In the case of Royal Mint high face value commems, they should have at least made this clear up front but then the coins would not sell as well. Seems they want to have their cake and eat it too!
The Royal Mint is trying to fool collectors with their coins of a so-called high value. As the founder of Coincraft of London, one of the UK’s largest and oldest coin dealers, we have been telling people for years that the Mint is selling them coins that no one will take in exchange. Today we have published a buying list for the Royal Mint ‘coins’. We are paying £3 for cn £5 coins in Unc, £10 for silver £20 pieces, £20 for £50 silver and £35 for £100 silver all in Unc.
The US Government charges about $50 for a Proof silver eagle with 1 ounce of silver in it. The Royal Mint charges £80 ($114) for a crownsized silver piece with 3/4 of an ounce of silver in it. The American coin can always be spent for $1 the British coin can never be spent.
Richard Lobel, PNG 229 ANA LM 1038
Richard, what has the Royal Mint said about this ?
How is this supposed to inspire confidence among Brits, especailly with a vote to exit the EU coming up in a few months ?
This morning Wednesday March 30, 2016, the Royal Mint sold out of their 15,000 mintage for each of the sterling silver proof coins for Jemima Puddle-Duck, Mrs. Tiggy-Winkle and Squirrel Nutkin. They were released last Thursday March 24, 2016 for £55 = $77.55 each.
On the ebay secondary market, the highest paid so far for the earlier sterling silver proof Peter Rabbit Coin is an amazing £620 = $876.99 as auctioned last Sunday March 27, 2016 @ 12:33:49 PDT for item #322043368516. £620/£55 is an extremely lucrative profit of 1,027% within its first month. The value of a collectible is determined by its supply versus demand, the quality of its condition and ultimately whatever price the market will bear.
We went online and saw a seller with a “Buy It Now” price of US $1,141.13. Each to his /her own. Wait 4 weeks and see what the coins are trading for. Then look again in 4 months, or a year.
However this is a coin with a marked denomination of 50P. It will ALWAYS we worth more than the denomination marked on the coin as it contains 8 grams of .925 silver, so few people would be stupid enough to use the coin at its face value.
The £20, £50 and £100 coins issued and sold “at Par” contain only a fraction of precious metal compared to their marked denomination. This is a totally different matter, as these “coins” are being sold as “legal Tender” but with a big fat asterisk [*] next to them.
The high denomination – low intrinsic value coins were just a marketing scheme plain and simple, thought up as a “new way” to sell more commemorative coins. Had the coins denominations been simply a tenth of the precious meta value none of this would have happened. Unfortunately the Royal Mint bought into the idea but did not have the foresight to see the unintended consequences of doing so. And when problems and questions arose, rather than suck it up, admit a mistake and move on, they do what most bureaucrats do, they try to change the rules of the game and/or change the definitions of what “legal Tender” means in practice…. after the fact and avoid any responsibility and make no admission that this was just a very very bad idea.
Hey… mistakes are made and bad ideas sometimes get executed. But trust, integrity and responsibility is measured by what we do and say when things go wrong, and the actions we take to make things right.
For a 2016 Royal Mint Peter Rabbit 50 pence Sterling Silver Proof Coin, the current highest record resold price on ebay is now £670 = $950.63 for Item number: 172147865161 today Saturday April 2, 2016 @ 12:06:44 PDT. Its gain of £670/£55 is an astounding 1,118% above its issue price of £55 only a month ago when these coins were released.
Forgive me Dwight, but what does any of this have to do with the article?
The Royal Mint sells commemorative coins that have face value and are supposedly “legal tender”. As it turns out with the 2016 Royal Mint Peter Rabbit sterling silver proof coin, this is an example of a legal tender coin having a low denomination. Although it does contains only 0.238 troy oz. of fine silver, its numismatic value far exceeds its face value. No one who knows better would be willing to exchange at the bank such a coin now potentially worth £670 for its mere 50 pence face value as legal tender.
The gentleman who was buying £100 face value commemorative coins on his credit card for sky miles was depending on the fact that redeeming the coins at the bank would give him back precisely the amount he spent on the card. The scheme depended on an understanding of the phrase “legal tender” common to many people and which the Royal Mint appears to have done little to disabuse potential customers from believing when it suited the Mint, even if the Mint itself abides by a more nuanced legal interpretation.
I believe the scheme would have been a lot harder to pull off if he had turned to eBay, or a coin dealer – places where numismatic value comes into play during negotiations.
The fact that face values are (usually) lower than intrinsic values is intentional, in that it works to prevent most people from spending valuable coins in commercial transactions. Not everybody, I’m sure, but most people yes. The same can be said for numismatic value except the Mint doesn’t have much say over that…
There had been a similar abusive scheme by shrewd individuals to accumulate credit card reward points by buying in bulk U.S. Mint presidential $1 coins from the U.S. Mint. This was ultimately curtailed by the U.S. Mint. On July 22, 2011, the U.S. Mint ended credit and debit card sales of $1 presidential coins because of “individuals purchasing $1 coins with credit cards, accumulating frequent flier miles, and then returning the unused dollar coins to local banks at face value as legal tender. By 2011, an unused inventory of 1.4 billion uncirculated $1 presidential coins were stockpiled at the Federal Reserve. On December 13, 2011, Vice President Joe Biden and Treasury Secretary Timothy Geithner announced that the minting of Presidential $1 coins for circulation would be suspended. Since then numismatic presidential $1 coins have been minted only for collectors. The program concludes this year 2016 with Ronald Reagan.
Ingenious, when you think about it !!
Commemorative coins are not an investment they are a keep sake. They are like all collectables, they have worth to the buyer and nobody else. The Bank of England is disingenuous in its advertising of these coins.
I have several Churchills some £2 and a £5 coin all of which are just scrap metal.