Pencil connectivity issues

Hello everyone!

Yesterday I recieved my brand new iPad Air(gen 3) and apple pencil(gen 1) and I'm having some weird connection issues with either one or the other.

So the iPad doesnt seem to recognize the bluetooth signal from the pencil. It does however know when its plugged directly into it, while the screen is locked and plug the pencil in, it will say something like "unlock to use USB accessories" but then any mention of it is gone when I unlock. The pencil is charged and broadcasting a signal and I know this because my phone can see the pencil in a bluetooth scan. Its like the ipad is refusing to talk to the pencil.

I've done a bit of google and troubleshooting and both items are supposed to be compatible with each other. I've tried factory reset and boggling everything on and off multiple times already.

I'm new to apple products so I could be missing something obvious here. Has anyone experienced this before? I'm having trouble finding answers for this specific problem.

Thanks.