The primary objective of the Gravity Recovery and Climate Experiment follow-on (GRACE-FO) satellite mission, due for launch in August 2017, is to continue the GRACE time series of global monthly gravity field models. For this, evolved versions of the GRACE microwave instrument (MWI), GPS-receiver, and accelerometer will be used. A secondary objective is to demonstrate the effectiveness of a laser ranging interferometer (LRI) in improving the satellite-to-satellite tracking measurement performance. In order to investigate the expected enhancement for Earth science applications we have performed a full-scale simulation over the nominal mission lifetime of five years using a realistic orbit scenario and error assumptions both for instrument and background model errors.Unfiltered differences between the synthetic input and the finally recovered time-variable monthly gravity models show notable improvements with the LRI, on global scale, of the order of 23%. The gain is realized for wavelengths smaller than 240 km in case of Gaussian filtering but decreases to just a few percent when anisotropic filtering is applied. This is also confirmed for some typical regional Earth science applications which show randomly distributed patterns of small improvements but also degradations when using DDK4 filtered LRI based models.Analysis of applied error models indicates that accelerometer noise followed by ocean tide and non-tidal mass variation errors are the main contributors to the overall GRACE-FO gravity model error. Improvements in these fields are therefore necessary, besides optimized constellations, to make use of the increased LRI accuracy and to significantly improve gravity field models from Next Generation Gravity Missions.