Mac Air Mid 2013 w Yosemite 10.10.1 Handoff not working with iPhone 5s with iOS 8.1.1

I've got a Macbook Air Mid 2013 with Yosemite 10.10.1 and can't get the 2 devices to stay paired via Bluetooth.
The 2 devices try to pair and after 2-3 sec's they disconnect.
Both are on the same wireless network and handoff is toggled on.
Does anyone have any ideas on how to get this handoff working?

Have you worked through the knowledge base tips in:Get help using Continuity with iOS 8 and OS X Yosemite - Apple Support

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