Before I answer here please bear in mind that my info maybe well out of date. I was medically discharged in 1997. I was on APFS75 and paid as a reserved rights Master although still only wearing three stripes.
Please note that a Medical Pension is totally different and seperate to a War Pension. A War Pension is always free of tax and is initially dependant on your state of being on discharge as reccommended by the RAF Medical Board. I believe you still have to apply for a War Pension, it is not automatic. It is important to get a break down of your disability percentages relating to your War Pension award, particularly that percentage related to your Primary Invaliding Condition. This becomes of vital importance when relating to your Medical Pension. War Pensions are fluid things and are normally dependant on continuing assessments (In my case a medical every two years) the results of which can either increase or decrease your War Pension award. Always declare ANY and ALL illnesses and injuries that have occurred during your service career from ingrowing toe nails to amoebic dysentry to loss of limb. This may seem mercenary but you won't feel this way if it ends up as your only source of income. If you are unhappy with your initial percentage breakdown then appeal immediately. I made this mistake and have been unable to appeal it since (My PIC was assessed at 0%, absolute joke) although my War Pension award is 30%.
A Medical Pension is a 'slightly enhanced' payment of your normal pension, In my case a 'slightly enhanced' 19/22 of a full pension as I had done 19 years reckonable service at the time. This pension is payable immediately on discharge and is index linked straight away. I know the rules have changed regarding 'acting' ranks, but as I had been paid as a Master for less than two years they tried to screw me down to a Sgt's pension rate, I argued this, saying it was them that was kicking me out not voluntary and therefore wrong. This was accepted and I have a Master's Pension. Gratuity used to 3 x Annual Pension and tax free. As far as tax goes you will pay tax on a Medical Pension UNLESS your PIC is rated at over 20%. Then your Medical Pension automatically becomes tax free. From 1%-19% you have to fight for your Medical Pension to be declared free of tax. NOrmally they will roll over and play dead at the first sign of an appeal in these cases. Because I didn't fight the case of my PIC being 0% in the first place I am now screwed and pay tax.
I hope this helps, I know some things may have changed over the years. Always expect to get shafted and you won't be dissappointed. Join the RBL and the Pension Society. I standby to be corrected on any points, but this is what happened to me.