I believe Nik is saying that, at least initially, the prize fund is fixed **regardless of deposits**. I think the subtext is that this is an experiment, and so they have an allocated prize budget (£12,500) and they will see how the account performs (in terms of deposits) and decide whether or not they will continue to offer the account and invest further in it.

So, putting it in terms of interest rate:

If there are 10,000 deposits of £1,000 into the prize account (£10,000,000 total) then the interest rate would effectively be £12,500 * 12 = £150,000 = 1.5%. If there’s only £1m of deposits, then the interest rate is effectively 15%. If there’s £100m of deposits, the interest rate is effectively 0.15%. Given there’s no guarantee that Chip will offer this account for a year, the use of “interest rate” here is very loose.

The difference is that premium bonds work based on a target of 1.4% of deposits, whereas Chip are (at least initially) working with a fixed pool of money (£12,500).