Data from the Melbourne Mercer Global Pension Index revealed that there had been little or no growth for many of the 18 participating countries, with the overall index average up from 60.5 in 2011 to 61.0.
Mercer senior partner and author of the report, Dr David Knox, warned that without action the sustainability of future returns are under threat.
"Many of the world's retirement systems are under increasing stress with an ageing population, low investment returns and, in some cases, significant government debt. Reform is needed to ensure that adequate benefits are provided over the long term in a sustainable manner."
Australia was, however, highlighted as "one of the leaders in its approach to superannuation", according to this year's study, after coming under fire in last year's report.
"Our superannuation system is in the middle of significant reform . but our current B-Grade [rating] is an important reminder that our world-class retirement savings system is in danger of failing us unless we take action now," Dr Knox said in 2011.
The Australian government has since undertaken significant reforms notably with the increase in mandatory superannuation guarantee contributions from 9 per cent to 12 per cent, to be introduced from July 2013, winning praise from Dr Knox.
"This reform to Australia's superannuation system will make a significant impact on the future results and edge the country closer to top spot," Dr Knox said.
This year Australia dropped from second to third place on the Index, registering only slight gains from 75.0 in 2011 to 75.7.
The Australian increase in the overall Index value was largely the result of a boost in the level of pension fund assets and a rise in the labour force participation rate amongst those aged 55-64. Australian funds also allocate more to growth assets than any other country.
This year Denmark has moved in to the number one position, receiving an overall index value of 82.9 and becomes the first system to be classified as 'A' grade, moving the Netherlands from the top position in the rankings.
