This paper considers variable annuity contracts embedded with guaranteed minimum accumulation benefit (GMAB) riders when policyholder's proceeds are taxed. These contracts promise the return of the premium paid by the policyholder, or a higher stepped up value, at the end of the investment period. A partial differential valuation framework, which exploits the numerical method of lines, is used to determine fair fees that render the policyholder and insurer profits neutral. Two taxation regimes are considered; one where capital gains are allowed to offset losses and a second where gains do not offset losses, reflecting stylized institutional arrangements in Australia and the US respectively. Most insurance providers highlight the tax-deferred feature of a variable annuity. We show that the regime under which the insurance provider is taxed significantly impacts supply and demand prices. If losses are allowed to offset gains then this enhances the market, narrowing the gap between fees, and even producing higher demand than supply fees. On the other hand, when losses are not allowed to offset gains, then the demand-supply gap increases. When charging the demand price, we show that insurance companies would be profitable on average. Low (high) Sharpe ratios are not as profitable as policyholders are more likely to stay long (surrender).

While the current pandemic is causing mortality shocks globally, the management of longevity risk remains a major challenge for both individuals and institutions. It is high time there be private market solutions designed for efficient longevity risk transfer among various stakeholders such as individuals, pension funds and annuity providers. From individuals’ point of view, appealing features of post-retirement solutions include stable and satisfactory benefit levels, flexibility, meeting bequest preferences and low fees. This paper proposes a dynamic target volatility strategy for group self-annuitization (GSA) schemes aimed at enhancing living benefits for pool participants. More specifically, we suggest investing GSA funds in a portfolio consisting of equity and cash, continuously rebalanced to maintain a target volatility level. The performance of a dynamic target volatility strategy is assessed against the static case which does not involve portfolio rebalancing. Benefit profiles are assessed by analysing quantiles and alternative strategies involving varying equity compositions. The case of death benefits is included, and the fund dynamics analysed by assessing resulting investment returns and the mortality credits. Overall, higher living benefit profiles are obtained under a dynamic target volatility strategy. From the analysis performed, a trade-off between the equity proportion and the impact on the lower quantile of the living benefit amount emerges, suggesting an optimal proportion of equity composition.