The UK’s John Lewis has seen its pension deficit increase by more than £500m (€586m) in six months, as the UK retailer’s real discount rate fell by 95 basis points into negative territory.

The company said its defined benefit (DB) deficit rose by £512m between January and June this year, despite fund assets increasing by more than £550m, to £4.7bn, over the same period.

It said a “steep reduction” in interest rates was to blame for liabilities rising to £6.2bn and noted that while it had applied a 0.7% real discount rate in January, by the end of June, the figure had fallen to -0.25%.

Deficits across the UK DB universe have been increasing steadily since May, with the latest authoritative figures estimating an overall funding level of 76.1% across nearly 6,000 schemes.

However, John Lewis was able to reduce its pension operating costs by 21.2% over the six months, largely as a result of its April switch away from enrolling employees into the underfunded DB scheme in favour of a hybrid fund.

In other news, the Department for Work and Pensions (DWP) declined to comment on press speculation that the £13.3bn (€18bn) British Steel Pension Scheme (BSPS) would not be granted a cut in indexation, as the government has attempted to decrease the pension burden ahead of a sale of Tata Steel’s UK business.

A consultation was launched earlier this year on a potential cut to pension indexation, seen by the trustee of BSPS as a way of cutting liabilities and avoiding entry into the Pension Protection Fund (PPF), where it believes members will face significant benefit cuts.

The proposed changes to indexation are controversial, and have been criticised by the Pensions and Lifetime Savings Association as “inconceivable” special treatment.

Now, according to reports, the changes have fallen out of favour since Theresa May became prime minister in July.

Allan Johnston, trustee chair at BSPS, said earlier this week the change in indexation remained the trustee board’s “preferred option”, and that he expected to have further discussions with the government until a decision is reached.

A DWP spokesperson told IPE the government was still reviewing responses to the consultation and would publish its response to it “in due course”, once it had fully considered all responses.