The John Lewis Partnership’s accounting pension deficit has increased by £512.1m since the 30 January 2016, it has announced.

The deficit now stands at £1,453.7m, up from £941.6m an increase of 54.4 per cent. Pension fund assets increased by £551.9m (13.1 per cent) to £4,750.3m.

However, the accounting valuation of pension fund liabilities increased by £1,064.0m (20.7 per cent) to £6,204.0m, which John Lewis said reflects a decrease in the real discount rate used to value the liabilities to -0.25 per cent at July 2016 compared to 0.70 per cent at January 2016, due to historically low bond yields.

“If this market driven rate persists at these levels to the end of January 2017, it will result in a significant increase in our pension operating costs for the next financial year, the year ending 27 January 2018,” the retailer said.

“Our deficit has increased by £512.1m over the last 6 months, driven by the steep reduction in interest rates. We are unusual in having an open defined benefit scheme, which means that it is a long term liability – our average duration is around 20 years - and that allows us to target higher returns than the average pension fund.

“We agree cash funding with the trustee based on that long term funding commitment. Our open defined benefit pension scheme is an important part of the total reward that Partners receive, and as a co-owned business we have more flexibility in the balance between pay, pension and distribution of profits than many other organisations.”

In addition, it said the pension operating cost was £96.4m, a decrease of £26.0m (21.2 per cent) on the prior year costs, reflecting the impact of our move to a hybrid pension scheme combining DB and DC pensions from April 2016, as well as an increase in the real discount rate used to determine the cost to 0.70 per cent at the beginning of the year from 0.35 per cent at the beginning of the previous year.

Pension finance costs were £14.8m, a decrease of £3.7m (20 per cent) on the prior year, reflecting a reduction due to a lower accounting pension deficit at the beginning of the year than at the beginning of the previous year. As a result, total pension costs were £111.2m, a decrease of £29.7m (21.1 per cent) on the prior year.

Furthermore, John Lewis said that given its string liquidity position, it made a cash contribution of £137m to the pension scheme in February 2016, to prepay approximately 10 months of contributions.

As a result, in the first half of the year, total cash contributions to the pension scheme were £139.3m, an increase of £56.5m (62.8 per cent). The scheme is currently undertaking a triennial actuarial valuation as at 31 March 2016, the first since the changes to its pension benefit, which will determine its ongoing contribution rate. The valuation should conclude by December 2016.

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