By Daniel Hunter
The cuts in child benefit could cost a family with three children aged under 6 around £50, 000 by the time their youngest child is 18 - more than a year's after tax salary for many people who stand to lose the benefit, according to new PwC analysis. Families with two small children could lose nearly £40,000.
PwC's analysis considers the sum of benefits that would have been received by a family from January 2013, when child benefit is withdrawn entirely for households where one person is earning £60,000 or more, until their children are 18. It is based on the future projected value of those benefits with the assumption that these benefits would have increased in line with annual inflation.
PwC looked at two hypothetical families: one with three children who will be aged 5, 3 and 1 on 1st January 2013; the other with two children who will be aged 3 and 1 on 1st January 2013. The value of these benefits were calculated and expressed in 2029 values, the last year the youngest child in both families will recieve benefits. These projections were in turn based on PwC projections of consumer price inflation and long-term inflation expectations based on the Bank of England's target inflation rate of 2% per annum.
The three child family would miss out on £50,684 worth of benefits according these calculations while the family with two children would lose out on £38,948.
Alex Henderson, tax partner at PwC, said:
"Many people affected by the child benefit cuts have probably not considered what the true cost will be to them over time. Our projections show the cost could be substantial, and could ultimately mean many middle income families have to work longer until retirement or until they can pay back debts."
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