It may be that your total income is too high to qualify for the pension exclusion. The instructions for NJ-1040 state:
You can exclude all or part of the pension income reported on line 20a if you meet the following qualifications
• You (and/or your spouse if filing jointly) were age 62 or older or blind/disabled as defined by Social Security guidelines on the last day of the tax year; and
• Your income on line 27 is $100,000 or less
