See demo - https://i.imgur.com/vgPPOgE.gif
Here my connection has the correct passphrase saved already. I double-click to open the connection and WinSCP 5.5.4 prompts me to re-enter the same passphrase already saved against the site definition. I then paste in the same passphrase in the prompt and my connection is opened successfully. Not sure why it's prompting as falling back to v5.5.3 everything works as it should.