The Welsh midfielder has been limited to just one Premier League appearance this season due to a hamstring strain, and failed to hold down a regular spot in the Reds XI last term after joining in a £15m move from Swansea City.
Pascoe, who was also number two to Liverpool manager Brendan Rodgers at the Liberty Stadium, is a great believer in Allen's ability and expects the 24-year-old to make a big impact in the first team when he returns to fitness.
He told the club's official website: "Joe is a great talent, a great player. We haven't seen the best of Joe yet. He's had a couple of injuries.
"He had his shoulder last year, then a hamstring - he had to battle through that. I'm sure, when he has come through all these now, we'll see the best of Joe.
"He's a great manipulator of the ball. He always wants the ball, that's the thing; he always wants to get on the ball. He'll want to score and get goals for the team.
Allen made 37 appearances for the Reds in all competitions last season, scoring once in the process.