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According to the Daily Mail, ministers want to free up the money in order to allow the Department of Work and Pensions to limit benefits cuts for the elderly but rumour has it the move is seen as a penalty for the Beeb's massive payroll.
As expected the BBC is fighting the proposal with all its might, fearing that the lost revenue would mean serious cuts to the programming budget.
At present, the Corporation receives some £3.6 billion in licence fee money each year but the loss of the over-75s payments could mean that other customers end up footing the bill, though a spokesman said that would "unacceptable".
But ministers, along with much of the general public, are furious at the BBC's refusal to cut pay packets within the Corporation.
The BBC recently confessed to spending £54 million each year on its stop-earning TV stars, with a total 'talent' bill of £229 million. And the executive payroll has also reached the £50 million mark.
A BBC Trust spokesman told the Mail: "Anything at this stage is speculation as we have yet to see the detail of the Comprehensive Spending Review."
But Michael Crick, political editor on Newsnight, said on his blog that he expected the BBC to fight the move "tooth and nail", and added: "This will be very awkward for the BBC politically.
"What is more popular - high salaries for BBC stars and senior executives, or free TV licences for the elderly?"
What do you think? Is it about time the BBC cut the stars' salaries in order that the elderly are not faced with benefits cuts? Leave your comments below...