Ministers are becoming increasingly concerned about the impact of Universal Credit, with the work and pensions secretary privately warning that families could lose £200 a month, The Times has reported.
Esther McVey reportedly told her fellow cabinet members that the rollouts could result in millions of families losing out on the equivalent of £2,400 a year.
It is thought that half of single parents and two out of three working-age couples will be affected by the new system.
The Times reported ministers are becoming worried about the reputation of the new system, with an increasing number of Tory MPs dealing with cases during surgeries.
Charity the Trussell Trust warned on Friday that future rollouts of the system, which combines six benefit payments into one, could contribute to a rise in food banks being used in affected areas.
The Times report follows an announcement by McVey on Monday, where she unveiled plans for a £39 million partnership with charity Citizens Advice to support applicants in getting their first payments on time.
Research by the Child Poverty Action Group in August warned that Universal Credit claimants in employment were facing cuts of more than £250 a month as a result of pay day coinciding with assessment periods.
HuffPost UK has approached the Department for Work and Pensions for comment.