The BBC is launching a consultation period to decide how licence fees for over-75s should be paid for.
They are currently financed by a government-funded scheme, which is due to end in 2020.
It is expected the cost of free licences to the over-75s will total £745m – a fifth of the BBC’s current budget by 2021/22.
The consultation period is running for 12 weeks from 20 November until 12 February.
In a speech to the BBC, Director General Tony Hall said there were “important issues to get right”.
Lord Hall added: “While the costs of the schemes are rising, so is the need for our programmes and content. We are looking at options for reform, what’s fair, what’s feasible,” he said.
It was also outlined that the cost of taking on the scheme would be the equivalent of what is spent today on all of BBC Two, BBC Three, BBC Four, the BBC News Channel, CBBC and CBeebies.
Future option suggestions
Four options were set out in a report, commissioned by the BBC, produced by Frontier Economics. They consisted of:
1. Scrap free licence fees for over-75s
The report estimates that residual costs to shut down the concession would cost £72m – or 10% of the cost of continuing with it.
When the government introduced the free licence fee for over-75s in 2000, it was argued the benefits would (largely) go to poorer households. However, that argument has weakened with the improvement in living standards for the over-75s.
2. Replace with a 50% concession for all over-75 households
A 50% concession is in line with what’s currently being offered to those with visual impairments.
It estimates the cost to the BBC would be around £400m in 2021/22, which is 56% of the cost of reinstating the current concession – the extra 6% is due to admin.
3. Increase the age threshold for eligibility
Raise age threshold to 77
Aligns with increased longevity and reforms to state pension age but retains an arbitrary threshold.
The report estimates that it would cost £645m which is 87% of the cost of reinstating the current concession in 2021/22.
They note the vast majority of households containing someone older than 75 also contain someone over the age of 77 so relatively few households would lose out.
Raise age threshold to 80
This would align with other pensioner benefits that begin at 80 such as the over-80s increase in winter fuel payments.
The estimated cost is £481m – that’s 65% of the cost of reinstating the current situation.
People over the age of 80 are more likely to live alone so this could help to target the concession at those who are most reliant on television for company.
4. Means-test eligibility for the concession
Link free TV licences to over-75s who get pension credit
Pension credit is a government-defined measure of need – so this would improve targeting of those at need of a free TV licence.
It’s estimated this would cost £209m or 28% of the cost of keeping the current concession.
Link free TV licences to anyone receiving pension credit regardless of age
Improves targeting and would align with other benefits.
The estimated cost to the BBC is £327m – 44% as much as that of reinstating the current concession.