STANDARD Chartered Bank economists have recommended a compulsory retirement scheme that gives employees the choice of private fund management companies or a government-managed investment vehicle. The latest issue of the bank's Hong Kong Economic Indicators says the setting up of a government vehicle ''will give security to those who do not understand or could not afford the solvency risk of their fund management companies for the price risk of the investment''. The report said similar ideas had become popular in Latin American countries in the past decade. According to the bank's chief economist, Kwok Kwok-chuen, countries like Argentina, Peru and Bolivia had adopted variants of this system. In Argentina, employees had a choice of staying in the government-run social security system or switching to privately-managed funds. Regarding criticism that the scheme failed to look after the non-working population, Mr Kwok said this could be solved by encouraging people to save and invest. ''Traditionally, most elderly people in Hong Kong depend on their families and their own savings for their retirement,'' he said. The report said the pension scheme was ''more effective as a scheme to generate immediate benefits to current retirees by imposing a levy on current workers than to protect those who were unable to prepare themselves for retirement in the future''. It said the elderly in need of assistance constituted less than seven per cent of the old-age population. With the increase in average education standards, the popularity of personal insurance and wealth accumulation, the ratio of elderly requiring government support would fall. A more focused scheme was better than one which gave out a fixed sum to every elderly person irrespective of their financial standing, it said. Hong Kong's prosperity partly hinged on a flexible labour market. It was unfair to ask the rising number of non-local workers to contribute to the scheme. It would also unnecessarily constrain people to stay in Hong Kong for their retirement, instead of going to less costly places like China. Mr Kwok also raised concerns about the Government's assumptions on the birth rate and the dependency ratio. He said he was not convinced that the birth rate would rise considerably in the coming years as predicted by the Government. Nor did he agree that new migrants and imported labour could bring significant relief to the growing dependency ratio. But he agreed they were difficult assumptions to make as they projected into years well ahead.