A general framework for multistage mean–variance post-tax optimization

An investor's decisions affect the way taxes are paid in a general portfolio investment, modifying the net redemption value and the yearly optimal portfolio distribution. We investigate the role of these decisions on multistage mean–variance portfolio allocation model. A number of risky assets grouped in wrappers with special taxation rules is integrated in a multistage financial portfolio optimization problem. The uncertainty on the returns of assets is specified as a scenario tree generated by simulation/clustering based approach. We show the impact of decisions in the yearly reallocation of the investments for three typical cases with an annual fixed withdrawal in a fixed horizon that utilizes completely the option of taper relief offered by banks in UK.