The Bank of England stepped in to calm markets after some types of pension funds were at risk of collapse.

It pledged to buy £65bn of government bonds after Friday’s mini-budget sparked turmoil on financial markets and the pound plunged.

Investors had demanded a much higher return for investing in government bonds, causing some to halve in value.

Pension funds, which invest in bonds, were forced to start selling, sparking fears of a fresh market downturn.

The Bank said its decision to buy government bonds at an “urgent pace” was driven by concern over “a material risk to UK financial stability.”

The government borrows money to fund its spending plans by selling bonds, or “gilts”, to investors such as pension funds and big banks on international markets.

But a collapse in the price of those bonds was forcing some pension funds to sell gilts and assets, further forcing down the price.

If that process had continued, there was a risk that those pension funds could have got to a position where they couldn’t pay their debts.

To stop this from happening the Bank said it would buy around £65bn of gilts on Wednesday.

Joe Dabrowski, deputy director of industry group the Pensions and Lifetime Savings Association, said: “While this is a complex situation as there has been a lot of volatility in the gilt markets in recent days, we would not expect any significant issues for savers.”

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