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The independent body raised concerns that the investment consultancy market was "dominated" by three major firmsReuters

UK pension consultants could face future regulation as a "highly concentrated" market has created "herding" patterns of investment behaviour, according to the Law Commission.

The independent body, which advises on changes to the law in England and Wales, raised concerns that the investment consultancy market was "dominated" by three major firms – Towers Watson, Mercer and Aon Hewitt – who have become too powerful in determining how pension funds invest.

The organisation explained that "anecdotal evidence" suggested that pension trustee boards comprised of laypersons who "lacked the skills and experience to critically evaluate and challenge the advice of consultants".

"The lack of regulation of investment consultants does appear anomalous, and we would ask that the government actively monitor this area," the report said.

"One possibility would be for the government to commission independent research into the issues raised by the current regulation of investment consultants.

"If specific risks become apparent, further regulation would be justified."

The findings from the Law Commission come after a poll from the National Association of Pension Funds found that the top six consultancies accounted for around 70% of the schemes the organisation surveyed.

"Meaning a great deal of influence sits in the hands of a few consultants in the largest consultancies," said Paul Lee, head of investment affairs at the NAPF.

"So it is interesting to note that the Law Commission indicates investment consultants may need to be regulated in the future."

Towers Watson had not responded to a request for comment at the time of publication.

Mercer had not responded to a request for comment at the time of publication.

Aon Hewitt had not responded to a request for comment at the time of publication.