A free TV Licence will only be available to households with someone over 75 who receives Pension Credit from June 2020, the BBC has announced.
About 3.7 million households which previously received a free licence will have to pay for one under the new scheme.
It is thought 1.5 million households will benefit from the move, which could cost the BBC around £250m by 2022 depending on the take-up.
The BBC's director-general Tony Hall said the new scheme "is fairest for the poorest pensioners", however a spokesperson for Prime Minister Theresa May said she is "very disappointed" with the decision and urges the BBC to look again.
Licence fees have been reviewed by the BBC, with the full cost of issuing free licences due to be passed to the corporation from government in June 2020.
The broadcaster, which is facing financial pressures and is attempting to streamline, has previously said that shouldering the burden of free licences would "fundamentally change" the corporation.
Pensioners had protested at the possibility of the concession being scrapped, and concerns were raised by some MPs over removing the free licence.
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It has been argued that the elderly are more likely to watch BBC programmes, which can act as a from of companionship and an antidote to social isolation.
Campaigners have also claimed that many older people in the UK struggle financially, and would find it difficult to pay the full fee.
Tom Watson, shadow culture secretary and deputy Labour leader, said the decision left a "Tory manifesto promise in tatters".
He added: "In the same week that Boris Johnson has championed tax cuts for the richest 8%, his government has delivered yet another ruthless welfare cut to some of the most vulnerable people in our society."
Lord Hall, who made the announcement that fees will be linked to Pension Credit and means-tested, said: "This has not been an easy decision.
"Whilst we know that pensioner incomes have improved since 2000, we also know that for some the TV Licence is a lot of money.
"I believe we have reached the fairest judgement after weighing up all the different arguments.
"It would not be right simply to abolish all free licences. Equally it would not be right to maiRead More – Source