CENTRAL Provident Fund (CPF) members will soon have the option of withdrawing part of their CPF savings in a lump sum after they retire.
But these partial withdrawals will be capped and "cannot be excessive", said Prime Minister Lee Hsien Loong at the National Day Rally last night.
This is because the core purpose of the CPF is to provide a steady stream of income in old age, said Mr Lee, adding that the limit could be 20 per cent of the total savings.
Still, Mr Lee warned that CPF members have to understand the trade-offs involved: "If you take out the lump sum, that means you have less left in the CPF, your monthly payments will also be less."
Currently, CPF members who turn 55 can withdraw their CPF savings after setting aside the Minimum Sum.
The Minimum Sum is now $155,000, but it will go up to $161,000 for those who turn 55 in July next year. Those who cannot meet the Minimum Sum can withdraw only $5,000.
From age 63, workers can start receiving monthly payouts from the savings that they set aside at age 55. The draw-down age increases to 64 next year and 65 in 2018.
Mr Lee acknowledged that the move to allow lump sum withdrawals, besides the monthly payouts, will help CPF members to do things that they have long wanted to do, such as going on a holiday, or help them deal with family emergencies.
"I appreciate why some CPF members want to take more money out... They have been saving up over a lifetime of work," said Mr Lee, adding that the relaxation in withdrawal rules came after it was considered "for a long time".
Member of Parliament Zainudin Nordin, who is also the chairman of the Government Parliamentary Committee for Manpower, backed the move.
"This will address some of the criticisms that CPF members cannot touch their hard-earned money," he said. "But there has to be a right balance because CPF is still fundamentally a scheme for retirement."
In his speech, Mr Lee pledged that the Government will build more flexibility into the CPF system and give CPF members more choices.
He said that the Manpower Ministry (MOM) has "worked out some possibilities" on the changes, but added that the issues are "very complicated".
An advisory panel has been set up to study them.
He added that the MOM will announce details of the panel soon.