Sales of annuities in the first six months fell by 49 per cent to £383m, as savers cancelled products during extended cooling off periods and new business volumes dropped substantially.
The insurance giant said it expects the annuity market to “remain subdued”, with volumes down 50 per cent for 2014 and down a further 50 per cent in 2015.
The flexibility introduced by the chancellor in his recent Budget will increase the choice available to consumers in their retirement, the company said.
L&G said it already offers income drawdown solutions to higher net worth customers and it intends to “refresh and relaunch” this into a simple income drawdown account to provide flexible access for all retirement savers.
LGIM has been developing “managed funds, suitable for individuals in retirement, which we expect to form an important part of our product offering”.
It added that many people will not have sufficient savings to fund the retirement income they would like, therefore it expects to see an increasing number of people release equity from their homes.
L&G said it is “assessing the viability of launching lifetime mortgages to help them do this”.
As a whole, L&G reported that its profit after tax was up 9 per cent to £507m in the first half of this year. It’s UK protection sales were up 17 per cent to £123m in this period.
Nigel Wilson, group chief executive, said: “These are strong financial results with dividends once again growing over 20 per cent and a return on equity of 17.6 per cent.
“We continue to deliver good growth on all other key metrics. We are successfully executing our strategy connecting our five long-term macroeconomic and demographic trends to real business outcomes.
“Strong business performance across a well-diversified range of insurance, savings and investment markets underpins consistent earnings quality and dividend growth and enables us to respond positively to the ever changing political and regulatory landscape.”