A financial adviser has predicted 'carnage' over the next two years as smaller firms attempt to comply with auto-enrolment.
Paul Davis believes problems lie ahead despite The Pension Regulator's announcement last week that 99 per cent of employers have enrolled their workers without having to take enforcement action so far.
Charles Counsell, TPR's executive director, reported the 4 million milestone for automatic enrolment is approaching.
Mr Davis, who works for Billericay-based firm Clear Financial Advice, said: "What seems to be amiss is the fact that the majority of firms who have already put in place their auto-enrolment pension are the big organisations that were already offering a pension scheme so they only had to make a few tweaks here and there.
"Over the next two years the majority of companies who will be having their staging date don't offer or promote a pension scheme at all for their staff so this will be a steep learning curve and one they can't afford to get wrong.
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"In my opinion I think a lot of the smaller firms will ignore it without realising the implications until it is too late.
"There are also firms out there struggling to stay afloat who potentially can't afford an increase in their payroll, let alone the staff having any spare money to pay in.
"The next 2 years I think will be absolute carnage as the insurance companies won't be able to cope with the demand, which is why some insurers are increasing their requirements to avoid the smaller firms that won't generate enough revenue."
With even large firms, which are used to dealing with pensions, having been sent enforcement letters during the first year of auto-enrolment, he said penalties are a fear for all employers.
He added: "Advisers need to concern themselves more with providing a simple solution rather than trying to offer a solution that may well have too many options and features that might not be needed."
Mr Counsell warned last week that any firms failing to comply in the time frame set out will face punishment and urged companies not to leave it until the last minute.