SINGAPORE - Central Provident Fund (CPF) members will soon have the option of making lump sum withdrawals from their CPF accounts after they retire, said Prime Minister Lee Hsien Loong in his National Day Rally speech on Sunday.

But these withdrawals will be capped and cannot be excessive, said Mr Lee, adding that the purpose of the CPF scheme is to provide a steady income stream in old age. A possible cap could be 20 per cent of the CPF savings.

Mr Lee said 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, like going on a haj, or dealing with family emergencies.

But the Prime Minister warned that CPF members have to understand the impact of the withdrawals: A lump sum withdrawal means a reduction in the amount left in the CPF and smaller monthly payments.

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 is set to go up to $161,000 for those who turn 55 in July next year. Those who cannot meet the Minimum Sum can only withdraw $5,000.

From age 63, workers can start receiving monthly payouts from the savings that they set aside at age 55. The drawdown age increases to 64 in 2015 and 65 in 2018.

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) is looking at changes to the CPF system and these changes are complex. An advisory panel has been set up to study the issues.

The MOM will announce details of the panel soon, said Mr Lee.