The ramifications of the Bank of England’s urgent purchasing of government bonds are being felt by pension funds and some insurance firms.

The upheaval in gilt (UK government bond) markets that led to last week’s spectacular intervention from the Bank of England continues to reverberate.

The Bank was obliged to buy long-dated gilts – those with a maturity of 20 or 30 years – on Wednesday last week following a wave of forced selling by pension funds.

Those pension funds had been engaging in strategies known as liability-driven investment (LDI) which, despite becoming a £1.5 trillion market, was until last week little known outside the world of pensions investing.

Under the strategies, pension funds seek ways to better match their assets (the retirement savings of scheme members) with their liabilities (the future pension payments that have been promised to those members on their retirement).

They did so using derivatives contracts – a way of using leverage – but, when gilt yields spiked higher as markets took fright at Kwasi Kwarteng’s borrowing plans in his mini-budget, the investment banks that write those derivatives contracts sought more money from the pension funds to reflect the fact that gilt prices were falling (the yield and the price move in opposite directions).

The episode has led to a lot of misunderstanding. One is that the Bank has spent £65 billion propping up the gilt market. It hasn’t: it has simply indicated that the maximum it could end up spending under its intervention will be £65 billion.

Another is that this is some kind of taxpayer bail-out of pension funds. Again, it isn’t.

It is more akin to the Bank’s asset purchase scheme, or Quantitative Easing in the jargon, under which the Bank bought assets like gilts and held them on its balance sheet, although the Bank would prefer this latest move not to be regarded as QE, more a special operation to ensure more orderly market conditions.

Pension funds have not been given something for nothing by taxpayers and nor does the Bank emerge with nothing for the money it spends – it emerges with a holding of gilts on which interest will be payable by the government.

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