The　pancake　structure　is　the　mainstream　optical　solution　for　virtual　reality　(VR)　displays　due　to　its　compact,　folded　optical　path.　However,　only　a　small　portion　of　the　light　can　pass　through　the　pancake　optical　engine　because　the　incident　light　has　to　be　polarized　and　directed　to　the　half　mirror　(HM)　twice.　In　order　to　improve　the　optical　efficiency,　a　new　pancake　optical　engine　is　proposed　for　VR　display,　which　employs　a　diffractive　deflection　film　(DDF)　with　different　focal　lengths　in　three　regions　and　two　cholesteric　liquid　crystal　(CLC)　lenses　that　respond　to　circularly　polarized　light.　The　CLC　lenses　are　modeled,　and　their　polarization　response　characteristics　are　verified.　The　pancake　system　is　simulated　and　optimized　in　terms　of　image　quality　and　evaluated　for　optical　efficiency,　achieving　2.86　times　the　optical　efficiency　of　the　conventional　pancake　system,　and　the　root　mean　square　(RMS)　radius　of　the　system　is　controlled　within　19　mu　m,　and　the　modulation　transfer　function　(MTF)　at　the　cut-off　frequency　is　greater　than　0.2.　The　results　indicate　that　this　structure　has　great　potential　in　the　VR　display　field.