[makomk]

Specifically, the problem is that a lot of these pension fund investments are in long-duration government gilts of a kind which are mostly useful to pension funds like them, and when the margin calls in and they had to sell there was not enough of a market for them and prices collapsed, which would have lead to more margin calls and prices collapsing until a substantial proportion of their investments had been transferred to bankers and speculators for much, much less than the actual value. Supposedly there were literally no bids for some of the gilts at some points.

I don't think there's much moral hazard in the Bank of England stepping in here; the duration structure of available gilts is a government creation anyway, a big reason no-one else wanted to touch them was because of uncertainty from the Bank's aggressive interest rate increases lately, and if government gilts aren't a safe, liquid investment we're all in deep trouble.