Millions of over-75s who are exempt from paying a television licence fee will see the perk end next year.
Only the poorest pensioners — those who claim pension credit — will be allowed to continue to watch the public service broadcaster's television channels for free.
Currently, an estimated 4.6 million households do not have to pay the £154.50 annual charge, which is currently funded by the Government. But, from next June, when that funding stops, millions will miss out.
Blow: Only the poorest pensioners — those who claim pension credit — will be allowed to continue to watch the public service broadcaster's television channels for free
The BBC said its cost-cutting decision, announced on Monday, was needed to avoid 'profoundly damaging closures' to services and channels.
To keep the scheme for all over-75s would cost £745 million a year.
Around 900,000 low-income households claim pension credit, a top-up to people's weekly earnings.
But take-up of the benefit is low, which means many who could still be entitled to a free TV licence will miss out.
Caroline Abrahams, charity director at Age UK, says: 'The BBC's decision will cause enormous anxiety and distress, and some anger, too, but in the end, this is the Government's fault, not the BBC's.
'It is open to the new prime minister to intervene and save the day for some of the most vulnerable older people who will otherwise suffer a big blow to their pockets and their quality of life.'
According to official figures, in 2016/2017 up to 1.3 million people missed out on the means-tested pension credit — a total of £3.5 billion — either through stigma or fears that they could be faced with reams of complicated paperwork.
Steve Webb, director of policy at Royal London, says: 'The pension credit system is a shaky foundation on which to build a free TV licence scheme.
'Even the Government thinks that more than a million very low-income pensioners may be missing out on pension credit, and those who are over 75 will now lose their free TV licence.
'It is vitally important that anyone over pension age on a low income makes inquiries about pension credit.'
To be eligible for pension credit, you must be aged 65 or over and on a low income.
There are two parts to the benefit — guarantee credit and savings credit.
If you are single and on a weekly income of below £167.25, guarantee credit will top up your earnings to that level. Couples with a joint weekly income of less than £255.25 can claim a top-up to that amount.
The savings credit element is to reward those with a modest income who have saved. It is possible to claim both parts of pension credit.
You may be entitled to it if you are over 65 and reached state pension age before April 6, 2016. To claim, you will need your National Insurance number, details of your income, savings and investments and bank details.
If you need help making a claim, a friend or family member can call on your behalf, as long as you are present — or they can request that the paperwork is posted out to you.
You can apply for the benefit four months before you reach state pension age.
Pension credit not only entitles you to a free TV licence (when you are over 75), it opens up other pensioner benefits, too.
Mr Webb says: 'People who get the guarantee credit element automatically qualify for electricity bill discounts from their supplier via the Warm Home Discount scheme. Whether you are a renter or a homeowner, you can still make an application.'
To find out if you are eligible for pension credit, visit gov.uk/pension-credit/how-to-claim or call 0800 99 1234.