The National Association of Service Pensions has welcomed a call by the European Commission for Malta to stop making deductions on pensions issued abroad, and said his association may seek refunds going back years and running into millions of euro.

The Commission said yesterday that the deduction of foreign pensions paid to former servicemen infringes EU rules and should be changed or the government will face legal action.

The Maltese government denied that community law is being broken. 

Formal legal procedures against Malta were launched within the EU two years ago. The issue affects some 6,000 people, mostly former employees of the British services. 

Publius Grech, secretary of the National Association of Service Pensions said his organisation was saddened that this remedy had to be sought through the Commission and that several Maltese governments had failed to resolve “one of the worst injustices since Malta’s independence”.

Asked whether his association would be insisting on arrears, Mr Grech confirmed to The Times that the association would be making the case for authorities to grant arrears from 2004 onwards – when Malta joined the EU.

“This is our money and we want it back,” he insisted.

It is estimated the costs of such arrears will amount to millions of euro and no reserve fund currently exists to make the payments.

In 2006, Joseph Caruana, an ex-British serviceman, had filed a petition with the European Parliament’s Petitions Committee requesting a remedy to the situation. His complaint, relayed by Nationalist MEP Simon Busuttil, was followed by two further petitions and prompted the Commission to start legal procedures against Malta over this issue.

Although the government recognises the injustice committed by Labour (which enacted the original law) and has been raising the service pension capping since 2008, it rebuts Commission’s claims that the provisions of the 1979 law are in breach of EU rules, particularly since Malta only became an EU member 25 years later.