Iphone has latest SW but trying to pair watch fails as it says Iphone is out of date.

I just paid over $350 to have my apple watch repaired (and they sent me another one for that price), but it will not let me pair my Iphone 6 plus. The watch is a series 4. I have rebooted both the watch and the phone several times. It starts the pairing but after entering the code and starts processing it comes up with the error message (and a link to update the phone OS). This really is killing me as the old watch paired fine; and now I get this surprise bill for repair and the new watch does not even work. Very unhappy with apple products lately.