The Royal British Legion has dropped the News of the World as its campaigning partner after allegations that the newspaper may have hacked into the phones of bereaved relatives of soldiers killed in Iraq and Afghanistan.

The Daily Telegraph yesterday claimed that the phone numbers of dead service personnel's relatives were found in the files of private investigator Glenn Mulcaire, who worked on behalf of the News of the World before being jailed for phone hacking.

This followed claims that the paper also hacked the phone of murdered schoolgirl Milly Dowler, as well as families of people who died in the 7/7 London bombings, among others.

Military charity the Royal British Legion expressed its "revulsion" at the latest phone hacking allegations against the embattled Sunday tabloid, and said that it has "suspended all relations with the newspaper pending a resolution of the allegations".

The Legion said that its advertising budget with News International, parent company to the News of the World, is also "under review". The charity currently takes advertising space in The Sun and The Sun's Forces Channel online to promote its welfare services for Armed Forces personnel and their families.

A spokesman said: "We can't with any conscience campaign alongside News of the World on behalf of Armed Forces families while it stands accused of preying on these same families in the lowest depths of their misery. The hacking allegations have shocked us to the core."

Previously, the legion has teamed up with the News of the World to campaign on Military Covenant issues, and it was preparing to launch another campaign with the paper to save the chief coroner's office from being abolished.

"Clearly, it would make a mockery of that campaign to go hand-in-hand with News of the World," the spokesman added. "We think we'll do better without them."

Kevin Hart, one of the Legion's lawyers who has worked closely with bereaved military families, said that he was "appalled that their private lives could have been invaded".

"The Royal British Legion does its utmost to provide assistance and comfort to these bereaved families, who deserve the nation's utmost gratitude and respect," he added. "To think anyone would exploit their grief is frankly sick-making."

Michele Price, another of the Legion's lawyers, said: "The Legion acts as their voice and their champion. I feel that my families would expect inhuman behaviour on a remote battlefield but not at the hands of Fleet Street."

The Legion added its voice to calls for a full judicial review into the phone hacking scandal, including "powers to call evidence and examine witnesses under oath".

Ford has already announced plans to pulls its advertising from News International due to the scandal, with a range of other companies also currently reviewing their options.