Out with the old: The Chelsea pensioners are facing the biggest shake-up in 300 years

There comes a moment in the life of any institution when change is inevitable. For over 300 years, the Royal Hospital in Chelsea has managed pretty much to avoid that moment. It was founded as a retirement home for soldiers by King Charles II in 1682, and, if he were to look round today, he would find it almost exactly as he left it.

Famous for their scarlet coats and black tricorn hats, the Chelsea pensioners live in the same Grade I-listed buildings designed by Sir Christopher Wren, and they still roam its 66 acres of grounds by the Thames in one of London's most desirable neighbourhoods. Meals are taken in the oak-panelled great hall, and they say their prayers in the adjacent white-plastered chapel.

One of the big problems with living in a 17th-century hospital, however, is bathrooms – or the lack of them. The in-pensioners, as they are called, don't get an en suite so much as a non-suite. In its current configuration, a floor of 36 pensioners shares just one bathroom at the end of the corridor. This can be a problem if you are 82, which is the average age of the current Chelsea troop.

When new managers took over five years ago, they embarked on an ambitious and bold refurbishment. In 2009, a new infirmary block was completed in the north-east corner of the grounds, to a design by Prince Charles' favourite architect, the neo-classicist Quinlan Terry. The Margaret Thatcher Infirmary replaced a 1960s building, and is where the more elderly and infirm residents live. It cost £29m, all raised through donations from the public, and has 125 spacious en-suite rooms. There is also a gym, a doctor's surgery, a chapel and a hydrotherapy pool.

Now comes the tricky bit: updating the original buildings. Here lies a dilemma at the heart of any restoration: how far can you modernise a building without damaging its integrity? Wren's layout has remained intact for 330 years. The pensioners still live in the same oak rooms where veterans from the Jacobite Rising of 1715 once bedded down on straw mattresses. This is considered one of Wren's finest works, and is a building that has an uninterrupted history of fulfilling the same function for which it was designed. Yet, for all its history and grandeur, the purpose of the Royal Hospital is not to be a museum, but a comfortable home for geriatric soldiers.

"When I arrived here, I thought the facilities were unacceptable," says Lieutenant-Colonel Andrew Hickling MBE, 60. "As I think you will agree, when you see what they get, it's got to change." Hickling was brought in as director of facilities five years ago, with a brief to oversee the refurbishment. Having spent his career in the Army, he is clearly used to getting things done. Yet, as he takes me on a tour of the hospital halfway through its refurbishment programme, it can be alarming to hear of his determination to "drag this place into the 21st century".

"We're going to rip all this out," he says triumphantly as we walk down one of the Long Wards, with its original carved oak berths. He reassures me that English Heritage has given the nod, and as he says, "It took us three years to get planning permission, but we got there." One of the conditions of his grand plan is that the original oak will be reinstalled in the end.

The money for this stage of the refurbishment, which will cost up to £60m, came from the sale of Gordon House, a Grade II-listed detached villa standing in the south-west corner of the grounds. It's thought it achieved a sum near the asking price of £75m when it was sold last year to the property developer Nick Candy, who plans to move in with his wife, the Australian actress Holly Valance. "We sold it on a long lease," says Hickling, "so it will come back to the hospital in the end. We haven't sold off the silver."

The hospital's main building is a U-shaped, three-sided courtyard facing the river. It is flanked by two adjoining courtyards on either side. Each wing has four floors, and each floor has two 200ft-long corridors, which run back to back, divided by a central wall. The floors are connected by shallow and broad stairs, to allow easy access for the elderly. Hickling says the planks used for the stairs are thought to have come from 17th-century ships, and points out the plugs that hold them in place, so that when the wood wears out, you can take the planks out and flip them over. "We haven't yet, so we know we have another 330 years in them!"

The pensioners' original rooms, as designed by Wren, measured 6ft by 6ft. They were enlarged to 9ft by 9ft in the 1950s, and roofed over. Hickling's plan is to reduce the number of berths per floor from 36 to 23. He will knock 20 doors through the central wall, so that each suite will have its own window, bedroom, bathroom and study. It will certainly make a change from the current arrangement.

There have been upgrades over the years. Central heating was fitted last century, so the two massive fireplaces in each Long Ward where rations were once cooked are no longer used. Each berth is currently furnished with a single bed, wardrobe, table and chair. There is a peg outside the door for hanging up the famous hats and uniform, and there's a little shuttered window giving on to the corridor. It's compact but cosy.

The corridors are the real lifeblood of the hospital. It's here where the pensioners spend much of their time, chatting and relaxing. On one side are armchairs, tables, and the clutter of retirement: newspapers, cups of tea, radio sets and crosswords. On the other is the frontage of the rooms, each with its own gilt-painted number over the door. During the day, the pensioners mostly leave their doors open. The result is a kind of old-age heaven: the security and comfort of your own room and possessions with, literally on your doorstep, the companionship of a corridor of like-minded people.

"What is so special about the Royal Hospital is that it is a community," says the lieutenant governor, 64-year-old Major General Peter Currie CB, later. "The things that are so ghastly in old age are boredom, inactivity and loneliness. Those are the things we challenge here, and I like to think we do it with a degree of success." He says residents live five years longer than their peers outside, which he attributes to good medicine and good food. "But above all it's to do with comradeship and community. There's no reason to be bored here, there's no reason to be lonely."

There is, however, some concern about the effects of giving the pensioners more private space. Now that each pensioner will have his or her own living-room, and will no longer have to walk down the corridor to visit the bathroom, inevitably there will be less interaction.

"The big thing about Wren's design was the communal corridor," admits Hickling. "And that's what they're worried about losing. They come out, they sit, they talk, they make friends." That concern is echoed by Eric Rawlinson, an 88-year-old veteran of the Second World War who is listening to a portable radio amid a jumble of papers at one end of his corridor as I pass by. When I ask whether he is looking forward to moving into his new berth, he gives a conditional yes: "Provided we don't lose that comradeship. That is a concern."

any people assume that the Chelsea pensioners are a dying breed of soldiers, who all fought together in one regiment. In fact, they are a perpetually regenerating body of former servicemen, who have chosen to retire in style. Wren built the hospital to accommodate 412 people, although these days they like to keep the headcount at about 300. Turnover is such that about 45 pass away each year. Any former soldier can join if they are 65 and, as the original charter demands, "unencumbered by spouse".

The deal is simple: you give up your Army pension and in return you get a room, three meals a day, access to an infirmary and on-site GP's surgery, plus all the benefits of living in a social community in the heart of London. The pensioners must be present for Founder's Day, when k they are inspected by a member of the Royal Family – the ceremony is held in late May to mark Charles II's birthday, as well as his restoration to the throne in 1660 – but otherwise they can come and go as they please, and are encouraged to have their own activities. They are allowed to have girlfriends, though they are not allowed to bring them back to the hospital. In 2009, women pensioners were admitted, and there are now six. There wasn't an ideological objection to women pensioners, says Hickling; the obstacle was more the impracticality of putting them on all-male wards. Currie adds that the paucity of retired women soldiers is another factor, and that female soldiers may not know they are eligible.

Barbara Whilds, 68, became a Chelsea pensioner last year. Her father had been in the Army, and after her own eight years of service, she became a nurse at a boarding school. Having divorced, she found the prospect of growing old alone daunting. "The security of being here is very important to me," she says. "Outside on civvy street, things aren't very good for pensioners, especially those by themselves: things are getting expensive and the care isn't maybe what it should be. Here, it's marvellous because if you find you become just slightly dependent, you can go to a ward where you're given a bit of help. And in the long run, you end up being looked after by the nurses but can stay in the same place."

Many of the staff, including the governor, the doctor and the matron, live on site, adding to a sense of community. Peter Currie believes the Royal Hospital could provide a good model for other care homes around the country. "Of course, we have the advantages of a beautiful site, and being in central London. But it's as much about quality of life. We want them to enjoy their old age in a way that is appropriate. Dance class, drama class, it's all about keeping people active and engaged and enabling them to enjoy their life even if they are infirm."

There are allotments, cricket and bowls pitches, organised whist drives and outings to theatres and sports matches. The pensioners are given four free tickets to all matches at Stamford Bridge, the home of Chelsea FC, seats at Lord's, and are regularly invited for tea at the Ritz. I have a long lunch with some of the pensioners in the hall – three courses of banter, laughter and one of the best steak-and-kidney puddings I've ever had.

Whether the buildings need improvement is a matter of opinion. What's certain is that the Royal Hospital's model as a care home doesn't. This is a community of like-minded, happy and well looked-after people. If I were a few years older and had an Army record, I'd move in myself.