You can do this but you need a yearMonthDuration not a dayTimeDuration (and there's no "T" in the literal):
<xsl:template match="/">
<xsl:variable name="date" select="date"/>
<xsl:variable name="current_date" select="bf:to-iso-date($date)"/>
<xsl:variable name="date_increase" select="'P5Y'"/>
<xsl:variable name="modified_date" select="string(xs:dateTime($current_date) + xs:yearMonthDuration($date_increase))"/>
<xsl:value-of select="bf:to-yyyymmdd-date($modified_date)"/>
</xsl:template>
Michael Kay
http://www.saxonica.com/
Author, XSLT Programmer's Reference and XPath 2.0 Programmer's Reference