UK retailer John Lewis has seen its pension costs rise by £60m (€82m) over the course of the current financial year, despite a 7% drop in its pension deficit.

The department store, which operates as a mutual, said its deficit stood at £1.1bn at the beginning of January, down by £92.9m over January 2015.

According to its half-yearly report, profit before tax was down by 26% due to the higher pension charges.

Charlie Mayfield, the company’s chairman, said the increase in pension charges was caused by “volatility in the market-driven assumptions”.

The 7.4% improvement in deficit was likely down to changes to the pension fund’s underlying assumptions, which saw its discount rate rise from 3.15% to 3.65% over the first half of the year.

At the same time, both assumptions underlying the measures of inflation – the consumer and the retail prices index – rose by 0.45 percentage points to 2.25% and 3.25%, respectively.

The report added: “The pension operating cost was £122.4m, an increase of £30.3m, or 32.9%, on the prior year costs, predominantly reflecting the substantial decline in the real discount rate used to determine the cost to 0.35% at the beginning of the year from 1.1% at the beginning of the previous year.”